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TMI Blog1970 (11) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... stration. It was stated that a deed of partnership dated the 16th March, 1959, had been executed and a new firm had been constituted consisting of seven partners. These seven partners and their respective shares are as follows : Name Shares I . Golam Hussain Hasanali 0-2-0 2. Hatimbhoy Molla Golam Ali (son of No. 1) 0-2-0 3. Abbashbhoy Molla Golam Ali (ditto) 0-2-0 0-8-0 annas 4. H. M. Golam Hussain (ditto) 0-2-0 5. Eusufali Hasanali 0-2-0 6. Fakruddin Eusufali (son of No. 5) 0-3-0 0-8-0 annas 7. Abbashbhoy Eusufali (ditto) 0-3-0 It was claimed that the sons of the two original partners have contributed to the firm's capital out of gifts made by their respective fathers. The Income-tax Officer took the view that there was no valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stituted by Golam Hussain Hasanali and his three sons were still receiving eight annas share in the firm and the group constituted by Eusufali Hasanali and his sons still had eight annas share in the firm. Thirdly, the new partners continued to appear in the pay register maintained for employees. And, fourthly, the statement filed before the Income-tax Officer in respect of salaries " paid to office staff " included also the new partners. The Tribunal has held that the department has not been able to substantiate its charges that there was no genuine firm in existence and that the apparent state of affairs was not real. The Tribunal has directed registration under section 26A. The department suggested to the Tribunal that the following qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore we make our comments on the facts of this case it would be useful to reiterate the basic principle which must be borne in mind to answer the second part of question No. 1 in this reference. In R. C. Mitter & Sons v. Commissioner of Income-tax the Supreme Court laid down, inter alia, that unless the partnership business was carried on in accordance with the terms of an instrument of partnership which was operative during the accounting year, it could not be registered under section 26A of the Income-tax Act, 1922, in respect of the following assessment year. In other words, to be entitled to registration under section 26A the partnership business must be shown to have existed in conformity with the terms and conditions of the instrumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm did not have sufficient cash in its till. What is more surprising is that the Appellate Assistant Commissioner has stated in paragraph 2 (at page 14) of his order : " On the 17th February, 1959, it is alleged that a gift was made by Golam Hussain Hasanali to his three sons, each getting Rs. 3,250. This gift was made by debiting the account of Golam Hussain Hasanali with Rs. 9,750 and crediting the accounts of the three sons with Rs. 3,250 each. Similarly, on 10th October, 1959, a gift is alleged to have been made by Eusufali Hasanali to his two sons of Rs. 5,000 each by making similar transfer entries in the account books. Registration of the firm consisting of the above seven partners was claimed in the assessment for the year under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mal course of the business of the firm. " The plain meaning of this clause is that each of the partners shall be armed with the authority to draw cheques on the firm's account with the Lloyds Bank Ltd. or any other bank in which the firm may have an account. But the facts found are that there was an account with the Bank of India Ltd. and only two partners had the authority to operate on that account. There was another account with the Union Bank of India and four of the partners were authorised to operate on that account. These facts clearly indicate that the provisions of clause 12 of the instrument of partnership were not given effect to. The cumulative effect of the findings aforesaid leads to the conclusion, in our view, that during ..... X X X X Extracts X X X X X X X X Extracts X X X X
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