9911796707
TMI Blog1974 (1) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Appellate Tribunal upholding refusal of the Income-tax Officer to grant registration to the assessee under section 185(1)(a) of the Act on the ground that no genuine partnership was brought into existence, is justified in law ? " Jammula Venkataswamy and his four sons constituted a Hindu undivided family of which the father was the karta. This Hindu undivided family carried on business in iron and hardware in the name and style of " Jammula Venkataswamy Sons " at Berhampur in the district of Ganjam. On September 19, 1964, there was a partition of the family assets and the claim made under section 171 of the Act has been duly accepted by the revenue. Five weeks after this partition, the father and two of the divided sons constituted themselves into a partnership firm as per instrument of partnership, dated the 25th October, 1964. This firm was registered with the Registrar of Firms and in due course an application for registration as provided under section 184 of the Act was made. The relevant features in the partnership deed were : " Clause 1. Name and Style : The firm shall be styled as Jammula Venkataswamy Sons (as agreed upon on partition by father and four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn from the fact that the bank account continued to be in the name of the erstwhile Hindu undivided family and no steps had been taken for notifying the bank about the partition as also the formation of the partnership firm. It was of the view that the bank was a third party and it was the Hindu undivided family and not the firm that continued to deal with the said third party. In the opinion of the Appellate Tribunal, this factor alone was a serious impediment in the assessee's claim for registration as a firm. It accordingly vacated the direction of the Appellate Assistant Commissioner and restored the order of the Income-tax Officer. The question as referred to this court shows that refusal of registration by the Tribunal was on the ground that " no genuine partnership was brought into existence ". From the statement of the case, we find that the assessee has objected to incorporation of these words in the question, but the Tribunal has overruled the same. This was what the Appellate Tribunal had stated while disposing of the second appeal : " We have carefully considered the facts and circumstances of the case. It is true that in partnership law, there is nothing to prevent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Income-tax Officer had come to hold that, in his opinion, there was no genuine partnership. That conclusion had been drawn from three features which have been already referred to by us. The Tribunal did not agree with two of the contentions and dealt with only one of the objections in a manner differently from the Income-tax Officer. At no place has the Tribunal recorded a finding of fact that no genuine firm had come into existence. We find substantial merit in the contention raised on behalf of the assessee that the Tribunal has never found that no genuine partnership was brought into existence. Learned standing counsel for the revenue has taken the stand that the objections of the Income-tax Officer are tenable in law and merely because the Tribunal has sustained only one objection out of it, he is not precluded from raising the other grounds for sustaining the order of the Income-tax Officer. Even if the contention of the learned standing counsel that he is entitled to raise the other grounds to sustain the order of refusal of registration, we think there is no merit in those grounds as we shall presently show. Mr. Srinivasan for the assessee relies upon the defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he partners should be acting as agent for all. Though those two conditions, by and large, have to be satisfied when the relationship of partners is created between the parties, we would emphasise that the legal requirements under section 4 of the Partnership Act to constitute a partnership in law are : (i) There must be an agreement to share the profits or losses of the business ; and (iii) The business must be carried on by all the partners or any of them acting for all. There is implicit in the second requirement the principle of agency............... From a review of the above decisions, it is clear that the mere nomenclature given to a document is by itself not sufficient to hold that the document in question is one of partnership. Two essential conditions to be satisfied are : (1) that there should be an agreement to share the profits as well as the losses of the business ; and (2) the business must be carried on by all or any of them acting for all, within the meaning of the definition of " partnership " under section 4 of the Partnership Act. The fact that the exclusive power and control, by agreement of the parties, is vested in one partner or the further circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a case where the partnership deed conferred power on the managing partner to admit new partners or expel any of the working partners if it was found that their continuance in the firm was detrimental to the interests of the firm and also provided that the working partners had to seek advice from the managing partner and act accordingly in all important matters. The question for consideration before the High Court was as to whether such a partnership deed was repugnant to the provisions of the Partnership Act. The court referred to some authorities and ultimately held that the partnership was not repugnant to law and was entitled to registration. In the instant case, we find that there is a clear agreement for sharing of profits or losses in clause 5 and the terms show that the first partner (father) had been given a domineering position in the control and management of the business, obviously because he had greater experience in the business and the two sons, though adults were comparatively young and inexperienced. Clause 9 of the partnership deed made provision for drawings by the two junior partners. It has been found that one of the partners had overdrawn. Clause 9 is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
