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TMI Blog2017 (8) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... he only common question of law raised for consideration is whether Section 13(b) of the Indian Partnership Act, 1932, could be invoked by the Revenue in the context of clause-7 of the Partnership Deed of the firm, M/s Saraf Trading Corporation. 2. On this issue we heard the learned Senior Counsel for the Revenue and the learned counsel appearing for the respective assessees. 3. Section 13(b) of the Indian Partnership Act, 1932, provides that subject to contract between the partners, the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm. In Mandyala Govindu & Co. v. C. I. T. (SC) [1976 ITR Volume 102], the Apex Court held that Section 13(b) of the Indian Partnersh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act for such a principle." Thereafter, the Apex Court held that the principles stated in the context of Section 253(2) of the Contract Act, 1872, would apply equally to Section 13(b) of the Indian Partnership Act, 1932; the two provisions are in identical terms. 4. Having thus seen the scope of Section 13(b) of the Indian Partnership Act, we shall now refer to clause-7 of the Partnership Deed, which reads thus: "7. The profits or losses of the firm shall be determined at the end of the accounting year and shall be divided between the partners and the beneficiary only as hereinafter provided : (a) An amount not exceeding 10 per cent of the profits of the firm for the year shall be distributed among the partners and beneficiary every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted among the partners, who, admittedly, are five in number. Clause 7 (b) also contains an agreement among the partners, regarding the manner in which the remaining 50% is to be appropriated. Section 13(b), as already seen by us, would apply in a situation where there is no agreement among the partners dealing with the appropriation of the profits or losses and a reading of the aforesaid provision of the partnership deed would show that there is an agreement between the partners in this regard. Evidently therefore, in such a situation, Section 13(b) of the Partnership Act cannot be called in aid by the Revenue. 6. This very question was considered by this Court in an appeal filed by another partner of the firm in the judgment in Nalini V. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in profits/losses. The question pertaining to the application of section 13(b) of the Indian Partnership Act had to be remanded to the Assessing Officer". Here we find that the profit has been declared and it was shown as Rs.9,000. Hence, according to us, section 13(b) of the Partnership Act will not apply. The Tribunal was not correct in fixing the share at 10 per cent. The share of the deceased partner was Rs. 9,000 and that has to be taken into account." 7. This judgment of the Division Bench was upheld by the Apex Court by dismissing Civil Appeal No.8247 of 2004 by its judgment dated 25.11.2009. Subsequently, the same view has been taken by this Court in I.T.A. No.1170 of 2009 concerning an assessment against the firm itself. 8. How ..... X X X X Extracts X X X X X X X X Extracts X X X X
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