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TMI Blog1965 (4) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ares of the profits and losses as follows : Rs. As. Ps. Rs.As.Ps. 1. Shri Narayanalal Darak 35,000---0----0 0--6---0 2. Smt. Godavari Devi 10,000---0----0 0--3---0 3. Smt. Shanta Devi 1,500---0----0 0--1---6 4. Smt. Leela Devi 1,500---0----0 0--1---6 5. Smt. Padma Devi 1,500---0----0 0--1---6 6. Shri Baburao Narayanrao Phatak (Working partner) nil 0----2----6 On October 8, 1957, an application was made to the Income-tax Officer under section 26A for registration of the firm for the assessment year 1958-59. On March 16, 1959, the Income-tax Officer granted the registration as the application was in time and in order. But the Commissioner of Income-tax, Hyderabad, held that the Income-tax Officer's order was erroneous in so far as it is prejudicial to the interests of the revenue and took proceedings under section 33B of the Act. On March 15, 1961, he made an order under section 33B cancelling the registration granted by the Income-tax Officer. His findings were that only the working partner, Baburao Narayanrao Phatak, is a genuine partner having a share of 0-2-6, that the remaining interest of 0-13-6 in the business is held by one Jagannath Darak in the names of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm ; and (10) copy of a letter dated June 30, 1958, addressed to the assessee-firm by one of its constituents, Mahabub Shah Gulbarga Mills Company, was endorsed to Jagannath Darak. The assessee-firm appealed to the Appellate Tribunal against the order of the Commissioner of Income-tax. The Tribunal considered every one of the aforesaid facts which weighed with the Commissioner. With regard to fact (1), the Tribunal was of the view that the capital contribution having emanated from Jagannath Darak did not justify a refusal of registration. It relied on Sundar Singh Majithia v. Commissioner of Income-tax for the position that the question in proceedings under section 26A is " whether the instrument (of partnership) is intended by the parties to have a real effect as governing their liabilities and rights, inter se, in relation to the business or whether it has been executed by way of pretence in order to escape liability for tax without intention that its provisions should in truth have effect as defining the rights of the parties as between themselves ? " With regard to the remaining facts, the Tribunal held that they were neutral and did not militate against the genuineness of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad, it is reasonably clear that the following essential conditions must be fulfilled in order that a firm may be held entitled to registration : 1. That the firm should be constituted under an instrument of partnership, specifying the individual shares of partners ; 2. That an application on behalf of, and signed by, all the partners, containing all the particulars as set out in the Rules, has been made ; 3. That the application has been made before the assessment of the income of the firm, made under section 23 of the Act (omitting the words not necessary for our present purpose), for that particular year ; 4. That the profits (or loss, if any) of the business relating to the pervious year, that is to say, the relevant accounting year, should have been divided or credited, as the case may be, in accordance with the terms of the instrument ; and, lastly, 5. That the partnership must have been genuine, and must actually have existed in conformity with the terms and conditions of the instrument. " The same view was in substance expressed in Commissioner of Income-tax v. Sivakasi Match Exporting Co., where his Lordship Subba Rao J. said : " The jurisdiction of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share given to the benamidar will be the correct specification of his individual share in the partnership. The beneficial interest in the income pertaining to the share of the said benamidar may have relevance to the matter of assessment, but none in regard to the question of registration. " It follows here that if the partnership is genuine, the mere fact that five of the six partners are benamidars for Jagannath Darak would not be a legal impediment to the registration of the firm. The second contention is equally without substance. The truth of the deed of partnership was not disputed throughout the proceedings. It surely constitutes evidence in support of the Appellate Tribunal's finding that a genuine partnership was formed unless it is found that the first named five partners were mere dummies or name-lenders for Jagannath Darak to the knowledge of the 6th partner, Baburao Narayanrao Phatak. The gist of Sri C. Kondaiah's submissions is that the Appellate Tribunal's finding that the first named five partners are not dummies is perverse, because it accepted the explanations given on behalf of the assessee-firm and disregarded the cumulative effect of all the facts and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation of the evidence. All the relevant evidence has been carefully considered by the Appellate Tribunal and it cannot possibly be said that no reasonable person would reach the same conclusion. On the other hand, it appears to us that the Commissioner, in drawing his conclusions from the circumstances, overlooked the danger of conjecture or suspicion taking the place of legal evidence which was expressed in R. v. Hodge by Baron Alderson in the following terms : " The mind was apt to take a pleasure in adapting circumstances to one another, and even in straining them a little, if need be, to force them to form parts of one connected whole ; and the more ingenious the mind of the individual, the more likely was it, considering such matters, to overreach and mislead itself, to supply some little link that is wanting, to take for granted some fact consistent with its previous theories and necessary to render them complete. " We have no hesitation in holding that the impugned conclusion of the Appellate Tribunal is rationally possible, Indeed, it arrived at a reasonable conclusion upon the materials on record. The answer to the question referred to us must be in the affirmativ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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