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TMI Blog1960 (9) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... llate Assistant Commissioner of Income-tax had rejected the application for registration? (2)Whether the Tribunal has not misunderstood the ground relating to division of profits on which the Income-tax Officer and the Appellate Assistant Commissioner of Income-tax rejected the application for registration? (3)Whether there is any material for the finding that the partners decided to estimate the divisible profits which estimate was arrived at and the divisible sum so determined was divided amongst the partners? The Income-tax Appellate Tribunal on being moved, in the first instance, for the purpose refused to state these questions on the ground that the only question argued before it was one of fact from which no question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of the firm. If the firm were genuine income-tax amounting in all to ₹ 3,247-2-0 levied on the five partners in their individual capacities should have been debited to the personal accounts of the partners separately and not to the joint partnership accounts in lump sum. What is most surprising is the fact that the income-tax amounting to ₹ 1,724-9-0 levied on Jhandaram for the assessment year 1953-54 when he was not a partner in the assessee firm was found debited to one of the joint accounts. This conduct of the assessee clearly shows that the provision in the instrument of partnership regarding division of profits was not acted upon. (2)According to the revised form of application for registration under section 26A, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were genuine, the correct constitution of the partnership concern should have been conveyed to the bank authorities. (4)As has been observed in the introductory paragraph the assessee did not divide the profits as determined by a recognised system of accountancy but merely divided refund of security of ₹ 16,872 on December 12, 1953, and cash balance of ₹ 12,149 on March 31, 1954. By not dividing the true profits on a specific date, i.e., on March 31, 1954, the assessee has not acted upon the instrument of partnership. The Appellate Assistant Commissioner of Income-tax to whom an appeal was preferred by the assessee firm rejected the same with the following observations : The most important fact that strikes at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve is not a proper division of profits. In our opinion, it is for the partners and for no one else to determine what the divisible profits are going to be. The fact that for the purposes of income-tax assessment certain add-backs are to be made and a different figure is to be arrived at is irrelevant. The only contention advanced by the learned counsel for the Department is that the firm of which the registration was sought under section 26A of the Act is not a genuine firm. For this contention, he bases himself on two grounds : (1)that the profits which were divided were not arrived at according to commercial principles ; and (2)that the income-tax payable by the partners was debited to the firm's accounts and not to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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