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TMI Blog1971 (11) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... ion referred is: " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the assessee-firm is entitled to registration under section 185 of the Income-tax Act, 1961, for the assessment year 1965-66 ? During the accounting period a partnership deed was entered into the a firm on March 22, 1965. The partnership deed is annexure " A ". The relevant paragraph of the partnership deed for the purpose of this case is paragraph 6, which is in these terms: " 6. The net profit of the business after adjustments shall be divided among the partners as shown below. 1 . M.O. Ithappiri 30 Np. in the rupee 2. T.V. George 30 Np. in the rupee 3. M.I. Leelamma 20 Np. in the rupee 4. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the instrument. The Tribunal however decided against the revenue on the ground that the preponderance of authority on the subject is in favour of the assessee. It referred to the decisions of the Allahabad and Mysore High Courts in Hiralal Jagannath, Prasad v. Commissioner of Income-tax, and in R. Sannappa and Sons v. Commissioner of Income-tax. Before us counsel for the assessee also invited our attention to an earlier decision of the Allahabad High Court in Laxmi Trading Company v. Commissioner of Income-tax, and the decision of the Mysore High Court in R.B. Angadi and Sons v. Commissioner of Income-tax, as also the decisions of the Andhra Pradesh High Court in Addepally Nageswara Rao and brothers v. Commissioner of Income-tax, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax. The question that arose for decision before the Supreme Court involved the interpretation of a partnership deed in which there was no specification of the shares of the partners either regarding profits or losses. This was apparently an omission and a rectification was made after the relevant accounting period. Negativing the contention that this rectification deed would have the effect of supplying the lacuna in the partnership deed drawn up, the following observation was made by the Supreme Court after a detailed examination of clauses 9, 11, 34 and 41(a) of the partnership deed that was construed. " But, in none of these clauses is it stated what the shares of the partners in the profits and losses of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income and assessed to tax accordingly. (2) If such share of any partner is a loss it shall be set off against his other income or carried forward and set off in accordance with the provisions of sections 70 to 75." It is thus clear that the assessing authorities will necessarily have to determine the share of the loss of every individual partner of a registered firm so that the loss may be set off against the other income of the partner or carried forward and set off in accordance with the provisions of sections 70 to 75 of the Income-tax Act, 1961. The specification of the proportion in which loss is to be shared, therefore, assumes an importance almost equal to that of the specification of the shares in the profit which is nec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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