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TMI Blog1973 (8) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... be a mistake as the assessment year in question is 1962-63 governed by the 1961 Act. Sheo Prasad Pandey, Kesho Prasad Pandey and Kamla Prasad Pandey are three brothers. They along with one Srimati Phuleshwari Devi, who is said to be their mother, constituted a partnership by a partnership deed dated May 31, 1956 ; the partnership commenced from June 1, 1956. All the four partners had equal shares. The partnership deed was registered on June 8, 1956, in the registration office, and it was registered with the Income-tax Officer for income-tax purposes for the first time on March 11, 1958, in relation to the assessment year 1957-58. For every successive year the partnership was registered till the assessment year 1961-62. For the assessment year 1962-63, under a confusion which was common, the assessee filed an application for renewal of registration in Form No. I.T. I-A. This was an application for renewal of registration under the Income-tax Act, 1922 (hereafter referred to as " the 1922 Act "). This application was filed on April 16, 1962. Eventually, the assessee filed an application in the correct form on December 17, 1962, which was described as Form No. 12 under the Rules whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, the assessment for the assessment year 1962-63 after granting registration to the assessee-firm was wrong in law, as held by the Commissioner and the Tribunal ? " The Commissioner or the Tribunal has nowhere found that there was any change in the personnel of the partnership. The very four partners who had constituted it in the beginning were also the partner under the new deed, which I shall discuss hereinafter in this judgment. Nor has it been found that there was any change in the shares of the partners; the shares remained equal as before. The Tribunal has compared the relevant terms of the two partnership deeds and come to the conclusion that there are changes in the terms, and, therefore, the new deed must be construed as a fresh deed of partnership. The Commissioner of income-tax had referred to the case of National Motor Company v. Commissioner of Income-tax for the proposition that if under an instrument of partnership it has been constituted for a fixed term, then on the expiry of that term registration of the firm could not be allowed. The argument advanced before the Commissioner with reference to section 17(b) of the Partnership Act was rejected. The Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in support of this view, and it was held that change in the constitution of a firm means change in the personnel of the firm, that is to say, a change in the persons who were partners in the firm. The same view was taken by the Mysore High Court in C. Srinivasa Rao and Brothers v. Commissioner of Income-tax, and it was said at page 105: "The words 'constitution of a firm' have, according to their plain meaning, reference to the composition or the structure of the firm. Generally speaking, the composition of a firm is determined by the partners who constitute it and its constitution would get altered when there is an inclusion of a new partner or an old partner ceases to be one. " The scheme of registration or its renewal has undergone a change under the 1961 Act, and the forms in force after coming into force of that Act are different. Under section 184(1), an application for registration of a firm has to be made to the Income-tax Officer on behalf of the firm if the partnership is evidenced by an instrument and the individual shares are specified in that instrument. There is a separate form given for making such an application. Sub-section (7) of section 184 provides: "Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Calcutta and the Mysore High Courts with reference to section 26(1) of the 1922 Act. In sub-section (2) of section 187 it has been provided now that, for the purposes of this section, there will be deemed to be a change in the constitution of the firm if one or more of the partners cease to be partners or one or more new partners are admitted, or where all the partners continue with a change in their respective shares or in the shares of some of them. In other words, for the application of the provision contained in section 187(1) of the 1961 Act, which corresponds to section 26(1) of the 1922 Act, it would be deemed that there is a change in the constitution of the firm not only when there is a change in the personnel but also when there is a change in the shares of the partners. I have referred to this aspect of the matter to indicate as to what is meant by the expression " change in the constitution of the firm " occurring in sub-section (7) of section 184 of the 1961 Act. The only requirement of the declaration given under the said provision of law is that there is no change in the constitution of the firm or that the shares of the partners as evidenced by the instrument o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Firstly, it is to be pointed out that there is no substantial change in the two deeds. Even if there is any, it is merely the changing of the terms of carrying on the partnership business and it has not the effect of bringing into existence a new partnership, or changing its constitution or changing the shares of the partners. In the original deed it was stated that the office of the partnership would be carried on " at Japla and at such other place or places ", but in the new deed it is mentioned only " Japla ". If no necessity was felt for opening the office at any other place, the place for running the office was fixed at Japla only. It was not a substantial change of the term at all. There was no substantial change in regard to the payment of interest on the capital investment of the partners. A sum of Rs. 4,000 was invested, free of interest, and any party investing more than his share will be entitled to interest at 61 per cent. per annum on that amount. In regard to the carrying on of the business also by other firms, there was merely a change in the phraseology, but no other substantial change. I have, therefore, no difficulty in holding that it was not a new partnership w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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