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TMI Blog1985 (8) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... r and Abhaykumar, while Darbarilal had one son by name Dhanyakumar. Dhanyakumar, in his turn, had four sons, namely, Keshavkumar, Prasannakumar, Sunilkumar and Sudhirkumar. Branches of Ratanchand and Darbarilal had long before separated. On March 1, 1943, a firm by name Ratanchand Darbarilal was constituted at Katni with Dhanyakumar and Jaykumar as its partners and these two represented their respective families. The firm carried on business in textile goods and in due course acquired substantial properties out of contributions made by the two Hindu undivided families. In 1950, a separate retail shop by name Premier Cloth Stores was opened at Katni by the firm. Similarly, in 1953-54, a branch was opened at Satna for handling cloth business. On November I, 1956, under a partnership deed, the Satna business was taken over by a firm consisting of three partners, namely, Dhanyakumar, Jaykumar and Abhaykumar, and the partnership was deemed to have begun from September 9, 1956. Prasannakumar was admitted to the benefits of the partnership as he was then a minor and the firm's business at Satna was run in the name of Savai Singhai Ratanchand Darbarilal. On April 1, 1957, under a separate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess without impairing its separate individuality. The financial arrangement made by the two businesses also did not establish the merging of the two units. If the Katni business transferred some of its borrowed moneys to Satna business without charging interest, that might justify disallowance of a part of the interest on borrowed moneys claimed by Katni business. But that could not convert the Satna business into a branch of the Katni business. Similarly, intimation to the banks was not decisive of the matter especially when the existing intimation did not run counter to the constitution of the Satna firm as claimed. The name of Satna business was not changed and the partner who had authority to operate continued to be a partner in that business. The only remaining consideration was about the introduction of capital. Assuming that it was done in a clumsy manner, we do not see how it can jeopardise the claim of Satna business to be independent. The new entrants, namely, Dhanyakumar (perhaps Keshavkumar) and Prasannakumar could well have been partners admitted to the benefits of partnership without introducing any capital at all. We are, therefore, of the view that the objections ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the profits from the business run in the name and style of M/s. Ratanchand Darbarilal, Satna, shall be excluded from the total income of M/s. Ratanchand Darbarilal, Katni ?" It is agreed at the Bar between counsel for the parties that the most material question for consideration is what was referred by the Tribunal under s. 66(1) of the Act for the opinion of the court. The additional questions would lose their importance and turn out to be academic once the main question is answered one way or the other. Whether a firm is genuine or not is a question of fact as was pointed out by this court in Ladhu Ram Taparia v. CIT [1962] 44 ITR 521, and it is for the Tribunal to reach a final finding on such question. As a fact, in this case, the Tribunal has reached such a finding. Before the High Court, this finding has been assailed on the ground that the Tribunal did not take into account all aspects on record while deciding the issue and acted on irrelevant material in reaching this factual conclusion. The High Court referred to several decisions of this court mainly among the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take notice of the fact that the name of the Satna business, had not been changed and the same partner who had authority to operate the account earlier continued to exercise authority even when the firm came into existence; the bank had not been intimated about the firm getting differently constituted but the Tribunal came to hold that not giving such intimation was not decisive especially when the existing information did not run counter to the constitution of the Satna firm as claimed. The question of introduction of capital also received special consideration in the hands of the Tribunal. On the basis of the material placed and available on the record, the Tribunal did reach the conclusion that the Satna business was an independent one with its own constitution and the firm had been constituted under a deed with well-defined terms and conditions. A further finding was recorded that the constitution of the Satna firm was different from the constitution of the firm controlling the Katni business. The Tribunal recorded a further finding that the profits had been divided in accordance with the provisions of the partnership deed and appropriate entries in the books of account had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey Sons v. CIT [1959] 36 ITR 194, examined the claim of a firm for registration under s. 26A of the Act and laid down that the following were the conditions to be satisfied in order that a firm may be entitled to registration: (i) the firm should be constituted under an instrument of partnership specifying the individual shares of the partners; (ii) an application on behalf of and signed by all partners and containing all the particulars as set out in the Rules must be made; (iii) the application should be made before the assessment of the firm under s. 23 of the Act for that particular year; (iv) the profits or loss, if any, of the business relating to the accounting year should have been divided or credited, as the case may be, in accordance with the terms of the instrument; and (v) the partnership must be genuine and must actually have existed in conformity with the terms and conditions of the instrument of partnership in the accounting year. Once such conditions are satisfied, it is the obligation of the ITO under the Act to extend the benefit of registration and allow the firm to enjoy the benefits provided by the Act. The Tribunal did record a clear finding that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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