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TMI Blog1984 (2) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... ration was grated. On 18th Feb. 1981, a fresh deed of partnership was executed by the four persons, namely, the existing two partners and their brothers, Shri Yogesh Kumar and their mother Smt. Kanta Devi Who were admitted as partners of the firm w.e.f. 1st April, 1980. On 28th March, 1981, the firm constituted by four partners filed an application in Form No. 11 along with the partnership deed for registration of the firm for the asst. yr. 1981-82. During the accounting period relevant for the assessment year under consideration the assessee firm carried on the business of executing contract work. The ITO examined the new partners namely, Shri Yogesh Kumar and Smt. Kanta Devi on 24th Nov., 1982 and 16th Dec., 1982 respectively. He was of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p deed that the two partners have been taken to finance the business, yet curiously enough not a single paisa has been contributed by them as capital. He also came to the conclusion that Shri Yogesh Kumar and Smt. Kanta Devi were never the real partners as they neither contributed labour nor capital. ITO has discharged his case to prove that the firm as per deed of partnership dt. 17th Feb., 1981 is not genuine. The action of the ITO in refusing registration was, accordingly, upheld and the appeal filed by the assessee was dismissed. The assessee has now come up in second appeal before the Tribunal. 4. The ld. authorised representative for the assessee reiterated the submission made before the AAC. It was submitted that in order to prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Jaora. The ld. authorities representative for the assessee further urged that from the mere fact that Shri Yogesh Kumar was a student at the relevant time and was living at Jaora cannot lead to the conclusion that he was incapable of looking after the business of the firm. In support of these contentions reliance has been placed on the decision of the Hon ble Madhya Pradesh High Court in the case of United Patel Construction Co. vs. CIT, Nagpur (1966) 59 ITR 424 (MP) and the decision of the Hon ble Supreme Court in the case of CIT vs. K. D. Kamath Co. 1972 CTR (SC) 124 : (1971) 82 ITR 680 (SC). Reliance has also been placed on the decision of the various benches of the Appellate Tribunal reported in (1982) 30 CTR (Trib) 6 and (1982) 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tners, and that all of them should participate in running the same, So long at the business is being carried by any party on behalf of all the parties to the agreement with a view to share its profits the provision of s. 4 will apply. According to s. 6 of the Indian Partnership Act, in determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in firm, regard shall be had to be real relation between the parties as shown by all relevant facts taken together. 8. As had already been pointed out above, on 17th Aug., 1981 a deed of partnership was executed as a result of which two new partners, namely, Shri Yogesh Kumar and Smt. Kanta Devi were brought in as new partners. The recital in this deed say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evi are to share profits and loss in the ratio of 30 : 30 : 20 : 20. The partnership agreement thus specifies the share of each partner. It further says that the four partners entered into an agreement to share the profits of the business and that the partnership had come into existence on 1st April, 1980. 9. While holding that the new partners are not genuine and the firm itself is not genuine, the lower authorities have also relied upon the statements made by the new partners before the ITO. The statement of Shri Yogesh Kumar Sethia clearly shows that he knew about the affairs of the firm as has been rightly pointed out on behalf of the assessee. He has not asked to give details of the contract work executed by the firm during the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on suspicion. Suspicion however, grave cannot take the place of proof. The burden placed on the assessee, in our opinion, is discharged and from the statements of the two new partners it was fully established that they did work for the firm during the accounting period relevant to the assessment year under consideration. The fact that the new partners did not make any capital contribution cannot militate against genuineness of the firm, as under the terms of the agreement it was not obligatory on the part of the new partners to make capital contribution in the firm. It is well settled that non-contribution of capital cannot be fatal to the claim for registration of a firm unless contribution of capital is made obligatory by the terms and co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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