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TMI Blog2001 (2) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... tamount to a major change in the constitution of the assessee-firm and did not adversely affect the grant of registration in this case? 3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally correct in holding that Riviera Apartments (P.) Ltd., were acting only in a representing capacity for the firm particularly when the name of the vendor in the agreement with the purchasers was shown-as that of the company?" Since the answer to the questions referred would primarily depend on the factual aspects determined by the Tribunal, it would be necessary to notice the facts found by the Tribunal in a little greater detail. The dispute is with regard to the refusal of registration to the respondent-assessee-firm in respect of the assessment year 1971-72. The relevant previous year ended on April 30, 1970. The assessee made an application in Form No. 11A on April 10, 1970. Along with the application a copy of the deed of partnership dated May 19, 1969, under which the assessee-firm was constituted, was also filed. The partnership deed dated May 19, 1969, referred to an earlier deed of partnership dated May 14, 1969. According to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the plot and sale of apartments was in fact carried on by the company on its own behalf and not on behalf of the assessee-firm, because: (a) in the sale agreements, entered into by the company with the purchasers of the flats, the company was described as the vendor, (b) during the previous year ten flats were booked 'for a total consideration of Rs.15,60,000 and the advance received against the said bookings was deposited in the Company's bank account and there was no entry regarding the bookings in the books of account of the firm, (c) some of the expenditure incurred for the construction was borne by the company in the first instance, and (d) occupation certificate from the NDMC was applied for and obtained in the name of the company; (2) clause 4 of the partnership deed dated May 14, 1969, required contribution of capital by Smt. Raj Mohini Suri and the company, but deed dated May 19, 1969, provided that the capital would be contributed not only by Smt. Raj Mohini Suri and the company but also the minors admitted to the benefits of the partnership but in fact the minors did not make any contribution towards capital ; (3) under the agreement dated March 27, 1969, Smt. Kanta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... August 26, 1969, and except for mere suspicion on the part of the authorities, there was no material on record to hold that the release deed was not genuine; (c) none of the parties comprising the land owners group was the benamidars or the nominees of any other party including the company ; (d) there was a similar readjustment as regards capital contribution as well as the admission of minors to the benefits of the partnership, which was purely an internal matter based on mutual agreement between the parties, which did not militate against the assessee's claim for registration ; (e) nothing much turned on the description of the company as the vendor in the agreement for sale of flats because it was clear from the preamble to the standard agreement between the company and the prospective buyers that the company was acting only in a representative capacity; (f) even though the sale proceeds of the flats were not deposited in the bank account of the firm straightaway and some of the expenses were jointly incurred by the company, in the first instance but this fact did not mean that the receipts and expenses of the firm had not been accounted for; (g) a full and complete account was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied with, particularly the clause pertaining to capital contribution by the parties. On the other hand, learned senior counsel for the assessee urged that the view of the Income-tax Officer and the Appellate Assistant Commissioner that no valid partnership in law had come into existence for lack of mutual agency because the business of the firm had been left in the hands of Smt. Raj Mohini Suri and the company, was based on misconception of section 4 of the Partnership Act. Relying on K. D. Kamath's case [1971] 82 ITR 680 (SC), it is submitted that vesting of control and management with two partners cannot affect the validity of the firm. On the aspect whether a genuine firm had in fact come into existence or not, learned counsel contended that the Tribunal, after due consideration of all the relevant factors, has recorded a clear finding that a firm valid in law and on the facts had come into existence. It is asserted that the afore-extracted findings of the Tribunal are pure findings of fact and no material has been brought on record by the Revenue warranting interference by this court in the exercise of its advisory jurisdiction. The special provisions applicable to the "f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirement the principle of agency. The court further observed that the fact that the exclusive power and control, by agreement of the parties, is vested in one partner, is not destructive of the theory of partnership, provided the said two essential conditions are satisfied. In S. P. Gramophone Co. v. CIT [1986] 158 ITR 313 (SC), elaborating the same issue, the Supreme Court observed thus: ". . . the concept of a firm being valid in law is distinct from its factual genuineness and for the purpose of granting registration, both the aspects are relevant and must be present and one without the other will be insufficient. In other words, even if a firm brought into existence by executing an instrument of partnership deed is shown to possess all the legal attributes, it would be open to the taxing authority to refuse registration if it were satisfied that no genuine firm has been constituted." In the instant case, the assessee-firm was brought into existence by virtue of an instrument of partnership deed dated May 19, 1969, which admittedly contains all the requisite legal attributes. Therefore, the real question for consideration is whether or not factually a genuine firm ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the conclusion that a genuine firm had come into existence, the Tribunal had specifically dealt with all the points raised by the lower authorities, reproduced above. The Tribunal has not found any merit in the factors taken into consideration by the Income-tax Officer and the Appellate Assistant Commissioner for holding that the assessee was not entitled to registration. Having regard to various clauses in the deed of partnership dated May 19, 1969, and the manner in which the business of the assessee was carried on by the managing partners, the Tribunal has come to the conclusion that a genuine firm has come into existence. Whether a firm is genuine or not is a pure question of fact. It is for the Assessing Officer in the first instance and the Tribunal, as a final fact-finding authority, to reach a final finding on this question (see Ratanchand Darbarilal v. CIT [1985] 155 ITR 720 (SC)). We are of the opinion that the Tribunal, while coming to the conclusion that a genuine firm has come into existence, has taken into consideration all material factors and the principle of law laid down in K D. Kamath [1971] 82 ITR 680 (SC) and S. P. Gramophone's case [1986] 158 ITR 313 (SC). ..... X X X X Extracts X X X X X X X X Extracts X X X X
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