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TMI Blog1940 (10) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... the mother of V.H. Desai was substituted for his wife and minor son, and she was given 4 annas. That is to say, the 5 annas which had previously been divided between the wife and the minor son, were distributed as to anna for V.H. Desai and 4 annas for the mother, who thus became entitled to the largest share in the firm. It is, of course, not disputed that the object of the alteration was to avoid the effect of Section 16(3) of the Income-tax Act. On an application to register the firm, the Income-tax Officer refused registration on the ground that the partnership deed produced was one prepared only to avoid what he calls proper taxation owing to the operation of the new Section 16(3) of the Act. That is not a good ground for refusing to register. I do not like the expression proper taxation . Taxation is either legal as falling within the terms of the taxing Act, or non-existent. As has been pointed out many times by this and other Courts, any one entitled so to conduct his affairs within the laws to avoid incidence of taxation and if a man finds that he will suffer less in taxation by carrying on business in partnership with his mother rather than his wife he is entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authorities on the old rule, I think that the new rule really does not alter the law as it previously existed; it only makes the true effect of Rule 4 clearer than it was under the previous wording. Under the old rule the Courts held that the Income-tax Officer was entitled to consider whether the deed produced for registration really constituted a partnership as alleged. Under Rule 2 the only person who can apply for registration is a firm constituted under an instrument of partnership specifying the individual shares of the partners, which must, of course, mean specifying correctly the individual shares of the partners. I think it is open, whether under the old rule or the new rule, to the Income-tax Officer to say that the shares, which appear in the deed, are not the true shares of the partners, and therefore, there is no proper application by the requisite firm. Speaking for myself, I should say that if it were shown that one of the partners was only a nominee of a share allotted to him or her for another partner, the deed would not then specify correctly the individual shares. I think it must specify correctly the individual and beneficial shares, because that is a matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 3. Mr. M.V. Desai (minor son of No. 1) ... 2 4. Mr. H.T. Desai (adult son of No. 1) ... 2 5. Mrs. Eatnagauri C. Munim ... 3 6. Mr. Nandkumar C. Munim ... 2 7. Charity ... 1 anna. Thereafter there came the amendment of Section 16 (3) of the Income-tax Act, in respect of the shares standing in the names of a wife and minor son of a partner. On that provision bsing made in the Income-tax Act, a new partnership deed dated 14th July 1937 was executed. The partners therein mentioned were Mr. V.H. Desai with 3 annas share, his mother (Mrs. Vijayabai M. Desai in place of Mr. T.V. Desai and Mr. M.V. Desai) with 4 annas share, and the remaining partners with their shares as in the previous deed. It is not disputed, that this resh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine or not, it does involve a consideration whether the share of an individual partner as mentioned therein is also correctly stated or not. For example if the share of a partner were stated to be 5 annas, and on inquiry and taking evidence the Commissioner definitely came to the conclusion that the share was 4 annas, the partnership agreement as put forth by the applicants would not be correct, and there appears to be little doubt that the Commissioner would be entitled to hold that the deed executed by the applicants was not a correct partnership deed. Partnership , as defined by the Partnership Act and which definition is adopted by the Income-tax Act, is a relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.It isthat relationship as setoutin thepartnership deed, which, the Commissioner has to determine, exists or not. Approaching the question from that point of view, in the present case the applicants stated that Mrs. Vijayabai was admitted as a partner with 4 annas share in consideration of capital brought by her into the business That is the only ground set up by the applicants in support of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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