1961 (8) TMI 48

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... mers it is found that financially the business suffers and as such the profits of the period as disclosed in the profit and loss account need not be divided and credited in the accounts of the partners and the same be kept as a reserve. The individual accounts of the partners were accordingly not credited with their shares of the profit in the aforesaid year, and the amount was credited to the reserve account on April 10, 1957, at the same time narrating the share of each partner therein, which corresponds with the partner's profit-sharing ratio under the deed of partnership. The firm applied for registration for the assessment year 1957-58, whose previous year would end on March 31, 1957, and the application was on July 20, 1957. .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... on formality being observed, and the words previous year were divided or credited in the form attached to rule 6 of the Income-tax Rules, 1922, do not require profit having been actually credited in the accounts of each partner of the firm with the result that, should the profit be credited to the partner elsewhere, that would be sufficient compliance with the form attached to rule 6. We also think those words indicate the ownership in the profits ceasing to be joint and the shares of each partner having become separated rather than each partner being required immediate use of the profits. The Tribunal would concede that, had the accounts of the partners shown the profits having been credited, the resolution would not be fatal to the fir .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... the partners are set out; but what is urged against the assessee is that in its books of account it has credited the profits to the firm name and not to the name of each constituent of the firm. Now if the shares of the partners are known--and for the purpose of this argument we will assume that the shares are known--then it is merely a matter of arithmetical computation. Applying the principle to the reference before us, the shares of the partners for the previous year had been ascertained, though credited in the reserve account, and the failure to make entries in each partner's account in the firm would be mere absence of arithmetical additions, which, in our opinion, would not be fatal to the application. The learned Governme .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X