9911796707
TMI Blog1994 (11) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... ws: The assessee was assessed in the status of a registered firm consisting of two partners for the assessment years 1970-71 and 1971-72. It was assessed as a registered firm comprising three partners for the assessment year 1972-73. The previous year of the assessee was the Samvat year which ends some time in October/November every year. By a deed of partnership dated November 9, 1971, one more partner, namely, Shri M. J. Shah, joined the partnership with effect from October 20, 1971. On the strength of the above deed of partnership, registration was granted by the Income-tax Officer to the assessee-firm for the assessment year 1973-74 by his order dated November 2, 1973. Subsequently, it came to the notice of the Income-tax Officer that on November 9, 1971, when a deed of partnership was executed in terms of section 186(1) of the Income-tax Act, 1961 ("the Act"), Shri M. J. Shah who was taken in as a full-fledged partner and who had signed the deed of partnership as such, was a minor. He became major only on January 17, 1972. On receipt of this information, the Income-tax Officer issued a notice being notice dated July 14, 1975, requiring the assessee to show cause why the regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... went in further appeal to the Income-tax Appellate Tribunal ("the Tribunal"). The Tribunal also rejected the appeals of the assessee for all the three assessment years and affirmed the order of the Income-tax Officer and the Appellate Assistant Commissioner. While doing so, the Tribunal held that during the previous year corresponding to the assessment year 1973-74, there was no genuine firm in existence as registered. The Tribunal also held that the deed of partnership dated November 9, 1971, on the strength of which registration was sought for by the assessee and granted by the Income-tax Officer for the assessment year 1973-74, being an invalid deed of partnership and the registration granted for that year having been cancelled on the basis of subsequent information, the assessee was not entitled to the benefit of continuation of registration for the two subsequent assessment years. Hence this reference at the instance of the assessee. There is no dispute about the facts of the case. The uncontroverted position is that the registration was granted by the Income-tax Officer to the assessee under section 185 of the Act for the assessment year 1973-74 on being satisfied that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade to the Income-tax Officer on behalf of any firm if (i) the partnership is evidenced by an instrument, and (ii) the individual shares of the partners are specified in that instrument. Sub-section (3) thereof requires such an application to be signed by all the partners (not being minors) personally. There is no controversy about the fact that under the Indian Partnership Act, a minor cannot be taken in as a partner of the firm. Under section 30 of the said Act, he can only be admitted to the benefits of the partnership. Section 185 deals with the procedure to be followed by the Income-tax Officer on receipt of an application for registration. It provides that the Income-tax Officer shall inquire into the genuineness of the firm and its constitution as specified in the instrument of partnership and if he is satisfied that there was during the previous year in existence a "genuine firm" with the constitution so specified, he shall pass an order in writing registering the firm for the assessment year. Section 186(1) of the Act which deals with the cancellation of registration reads as follows: " 186. Cancellation of registration.--(1) If, where a firm has been registered or its r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuine firm was in existence" did not receive the proper attention of the court. The court merely interpreted the expression "no genuine firm was in existence" without due emphasis on the expression "as registered". This decision, therefore, is not of much assistance to us in deciding the controversy. We have also considered the decision of the Gauhati High Court in Mahabir Prasad Kishanlal and Co. v. CIT [1976] 102 ITR 466. In that case, the partnership deed had sought to make three minors full-fledged partners. Registration was granted to the firm and renewed for the assessment year 1955-56. In the year 1964, the Income-tax Officer passed an order cancelling the registration for the year 1955-56. This order of cancellation of registration was set aside by the Appellate Assistant Commissioner but restored by the Tribunal. On reference, the High Court approved the order of the Tribunal. It was held that the partnership deed which had sought to make the minors full-fledged partners being contrary to the relevant provisions of the Indian Contract Act and the Indian Partnership Act was invalid and hence the Income-tax Officer had jurisdiction to cancel the registration of the firm. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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