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TMI Blog1962 (9) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... 949, represents a genuine or sham transaction? The facts of the reference are as follows: In the assessment year 1950-51 the assessee, Messrs. Murlidhar Kishangopal of Indore, made an application under section 26A of the Act for registration of their partnership firm as constituted by a deed of partnership dated February 3, 1949. It was stated by the assessee that Murlidhar Jhavar and his six sons were members of a joint Hindu family carrying on business in money-lending and speculation; that the family disrupted on October 29, 1948 ; and that subsequently Murlidhar and his sons formed a partnership and executed a deed of partnership on February 3, 1949. The Income-tax Officer rejected this application. In rejecting the claim for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the joint family, and that the firm was not registered under the Indore Partnership Act for nearly a year and a half after the commencement of the alleged partnership. The facts found in the statement of the case submitted by the Tribunal on June 24, 1960, the supplementary statement dated April 28, 1962, which the Tribunal was asked to submit by this court on August 17, 1961, are that Murlidhar and his family constituted a joint Hindu family which disrupted on 29th October, 1948; that on November 2, 1948, the members of the erstwhile joint family entered into a partnership and executed a deed of partnership on February 3, 1949; that Murlidhar and his six sons continued to live and mess together even after the disruption of the family; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... version that the joint family had disrupted. There is nothing to prevent a family from disrupting and forming a partnership and the members of the family living and messing together even after the disruption of the family and formation of the partnership. The retention of control and management of the partnership business by Murlidhar alone was in accordance with the terms of the partnership deed that the partnership business would be managed by Murlidhar and that the other partners would have no power to incur any liability in the firm's name. If a partnership deed puts restrictions or limitations on the rights of some partners, that does not necessarily vitiate the partnership: see Steel Brothers and Co. Ltd. v. Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amps before the disruption of the family has no relevance at all on the question of the existence or genuineness of the partnership. The Partnership Act does not make registration of firms compulsory and does not impose penalties for non-registration, though the consequence of non-registration is to impose a disability in the matter of the bringing of certain suits in respect of partnership which have not been registered under the Partnership Act. It is also not a requirement of section 26A of the Income-tax Act that the firm should be one registered under the Partnership Act. The Tribunal was therefore not justified in relying on the fact of non-registration of the firm for over a year and a half as a circumstance going to show that the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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