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TMI Blog2004 (11) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... stion for the opinion of this court at the instance of the Commissioner of Income-tax, Allahabad, for the assessment year 1977-78: "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in directing the Income-tax Officer to grant registration to the assessee-firm?" The facts of the case are as follows: The assessee-respondent filed an application for registration of the firm for the year 1974-75 along with the instrument of partnership deed dated September 22, 1973. In the partnership deed the following persons are partners: (1) Badri Prasad 19 paise in a rupee (2) Ganga Ram 25 paise in a rupee (3) Shankar Lal 19 paise in a rupee (4) Jamuna Prasad 25 paise in a rupee (5) Gopi Nath 06 paise in a rupee Besides the above partners one Lakhan Lal (minor) was admitted to the 4 benefits of partnership to the extent of six paise in a rupee and has been made liable to the losses of the firm although his liability was limited to the extent of his share. The Income-tax Officer refused to grant registration to the firm on the ground that the minor Lakhan Lal was made liable for the losses of the firm to the extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Department has placed reliance upon the following cases in support of his argument that as in the present case the minor has also been made liable to share the losses to the extent of his share, according to section 30 of the Indian Partnership Act, the firm is not entitled for grant of registration. (1) CIT v. Oriental T. Maritime [1997] 227 ITR 244 (AP); (2) Addl. CIT v. Uttam Kumar Pramod Kumar [1978] 115 ITR 796 (3) CIT v. Dwarkadas Khetan and Co. [1961] 41 ITR 528 (SC); and (4) Sri Ramamohan Motor Service v. CIT [1973] 89 ITR 274 (SC). On the other hand, learned counsel for the assessee has placed reliance upon the following two judgments: (1) CIT v. Vijai Kumar Rajesh Kumar [1998] 231 ITR 625 (All); and (2) CIT v. Nand Lal Jagdish Prasad [1997] 226 ITR 312 (All). The provisions of the Income-tax Act require that the partnership deed must specify the manner in which profits and losses of the firm are to be distributed amongst the partners. The case of the parties is that the partnership deed in question provides that the minor would be entitled to share six paise per rupee in the profit and loss of the firm. The contention of the Revenue is that since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97] 227 ITR 244 (AP) lays down that section 30 of the Indian Partnership Act provides that a minor cannot be made liable for the losses of the partnership. If at all a minor should be admitted into the partnership, he should be admitted for the purpose of profits only. In that case the minors were clearly admitted to share in the profit and loss of the firm. In that view of the matter it was held by the Andhra Pradesh High Court that the assessee was not entitled for registration of the firm. In Addl. CIT v. Uttam Kumar Pramod Kumar [1978] 115 ITR 796 it was held by this court that where a minor is admitted as a full partner the deed is invalid. Under the general law of partnership a minor cannot be a full partner liable to share in the losses. He can only be admitted to the benefits of the partnership. In other words he can only be entitled to share in the profits and not losses. The relevant paragraph is quoted below: "Under the general law of partnership a minor cannot be a full partner liable to share in the losses. He can only be admitted to the benefits of the partnership. In other words, he can only be entitled to share in the profits, and not losses. Under the partnersh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use this court was of the view that so far as losses are concerned, up to 40 per cent, it is well defined to be borne out by the adult partners of the firm. The question in which ratio they shall share 60 per cent, losses falling to the share of the minors, in the absence of any agreement to the contrary, it was held that it will be inferred that the partners share in losses falling to the share of minors in the same ratio in which they agreed to share the losses up to 40 per cent. Thus it is crystal clear that in that case there was no specific provision that minor would also be liable to share losses in the firm. Therefore the facts of that case are not parallel to the facts of the present case. In the case in hand there is a specific provision in clause (5) of the deed that minor would be liable to share the losses of the firm also to the extent of his share with the rider that he shall not be personally liable. Therefore the aforesaid case is distinguishable on facts and has no application to the facts of the present case. The controversy involved presently was not involved therein. For the same reason the case of CIT v. Nand Lal Jagdish Prasad [1997] 226 ITR 312 (All) is disti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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