9911796707
TMI Blog2000 (10) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... ssentially as follows : One Brij Lal was carrying on business in the name and style of K. B. and Co. on proprietorship basis up to June 30, 1971. With effect from July 1, 1971, a partnership was constituted on the basis of a deed of partnership, which was drawn up on July 19, 1971. The shares in the profit and loss were as indicated below : Name of partner Shares in profit Share in losses Shri Brij Lal 1/6th 1/3rd Smt. Asha Rani wife of Shri Brij Lal 1/6th 1/3rd Shri. Shrinder Kumar son of Shri Brij Lal 1/6th 1/3rd Moti Sagar minor son of Shri Brij Lal 1/6th - Prem Sagar minor son of Shri Brij Lal 1/6th - Vijay Sagar minor son of Shri Brij Lal 1/6th - Clause 3 of the deed of partnership provided that it was not necessary for any of the partners or for the minors to invest any amount towards the capital of the firm. Clause 6 provided that the bank account of the firm shall be operated by Brij Lal alone and by others only on the authority of Brij La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amongst the alleged partners or credited to their capital accounts. In these circumstances, it was held that the business actually belonged to Brij Lal as proprietor. The entire income of the alleged partnership was assessed in the hands of Brij Lal as an individual. The assessee preferred an appeal before the Appellate Assistant Commissioner (in short "the AAC"), who confirmed the Income-tax Officer's views. As regards the assessment year 1974-75, the Income-tax Officer following his earlier order refused registration. The only factual change was that Moti Sagar, one of the minor sons, had attained majority and a new partnership deed was executed. Moti Sagar attained majority on July 7, 1972, and he elected to continue in the partnership. In the new deed of partnership dated July 26, 1972, operating from July 7, 1972, Moti Sagar became entitled to a 1/5th share in the profits and was also liable for 1/3rd share in losses. Clause 7 of the deed was in pari materia with clauses 8 and 9 of the deeds of partnership dated July 19, 1971, and May 26, 1972, respectively. The Appellate Assistant Commissioner confirmed the refusal for this year following the order passed in the previous ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the business ; and (ii) 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. We will now refer to some of the provisions of the Act as well as the Partnership Act. Section 2(23) of the Act provides that the expressions "firm", "partner" and "partnership" have the same meaning respectively as in the Partner ship Act. Chapter XVI deals with "special provisions applicable to firms". Section 184 of the Income-tax Act lays down the procedure regarding registration of firms. Section 295 authorises the Central Board of Revenue, subject to the control of the Central Government to make rules for carrying out the purposes of the Act. The relevant Income-tax Rules lay down the details of the procedure for making an application-for registration of a firm as contemplated under section 184. As there is no controversy that the application has been made by the appellant in accordance with section 184 and the relevant rules, it is unnecessary for us to quote the section and the relevant rules, i.e., Income-tax Rules, 1962 (in short, "the Rules"). Part V thereof deals with "registration of firms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, any act done by a partner on behalf of the firm which falls within his implied authority binds the firm, unless the person with whom he is dealing, knows of the restriction or does not know or believe that partner to be a partner." It was, inter alia, submitted on behalf of the assessee with reference to the conferment of various clauses of the deed of partnership that the fact that exclusive power and control of the business is in one person and the further circumstance that only one person can operate the bank account are not destructive of the theory of partnership provided the two essential conditions are satisfied. At this juncture, it is to be noted that the Tribunal relied on section 33 of the Partnership Act to conclude that the element of partnership was absent. The said section 33 provided that a partner may not be expelled from the partnership by any majority of the partners except in the exercise of powers in good faith conferred by contract between the partners. In other words, the power of expulsion can be conferred provided such an action is taken in good faith. Whether the relationship of partnership exists in a given case must be determined on the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s actions are binding on all the three partners equally." The said case seems to be standing on a similar footing as the case at hand. Learned counsel for the Revenue wanted to bring a distinction by submitting that partners Nos. 2 and 3 had the powers to withdraw from the partnership jointly or severally and such a stipulation is not there in the present case. We do not think that such a distinction is of any relevance. For withdrawing there is no legal necessity for a specific mention in the deed of partnership if the partnership is at will. We do not think that specific mention relating to the power of petitioners Nos. 2 and 3 to withdraw from partnership jointly and severally made the case distinguishable from the present case. The above being the position, the Tribunal was not justified in upholding the order of the Revenue authority, i.e., in refusing registration. But that brings us to the question as to whether was the assessee per se entitled to be granted registration. One of the grounds on which registration was refused by the Revenue was non-distribution of profits. The Tribunal will consider this aspect afresh as it had not done so, as on the other aspects it had u ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
