1962 (9) TMI 90

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..... tatement of the case, are these. Madanlal, who was dealing in silver and gold ornaments, was the sole proprietor of the business which he carried on. He entered into an agreement with his brother, Chhaganlal, by which they became equal partners in the business with effect from October 24, 1957. The terms and conditions on which they joined the partnership are contained in the deed dated January 9, 1958. One of these terms provides that each partner will be entitled to interest at 6 per cent. per annum on his capital investment. This partnership was duly registered with the Registrar of Firms and the bankers were also informed of the change in the ownership of the business. On April 4, 1958, the partners duly made an application in the presc .....

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..... in existence constituted as shown in the instrument of partnership and that the application has been properly made, he shall enter in writing at the foot of the instrument or certified copy, as the case may be, a certificate in the following form, namely: 'This instrument of partnership/certified copy of an instrument of partnership, has this day been registered with me, the Income-tax Officer for..............in the State of...............under section 26A of the Indian Income-tax Act, 1922, and this certificate of registration shall have effect for the assessment for the year ending on the 31st day of March 19.' (2)If the Income-tax Officer is not so satisfied, he shall pass an order in writing refusing to recognise the .....

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..... he mere fact that the partners did not adhere to the term relating to payment of interest as provided in that instrument can be no ground for refusing to register the firm. This is what the Tribunal stated: It is not the department's case that the profits as ascertained by the firm were not divided amongst the partners in accordance with their individual shares as specified in the instrument of partnership governing the constitution of the firm. What we wish to emphasise is that the ground for refusing to register can be the non-existence of the firm as constituted by the instrument of partnership and not mere subsequent deviation from one of the terms relating to the marking of accounts. In this view, the firm is entitled to .....

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