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TMI Blog1987 (7) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... hare losses. The firm was granted registration for the assessment year 1969-70 and the registration was continued for the next following years till the assessment year 1975-76 on the basis of declaration filed in Form No. 12 by the firm. For the assessment year 1976-77 also, the assessee-firm filed declaration in Form No. 12 on June 29, 1976, along with the return. The Income-tax Officer, however, discovered that Pawan Kumar whose date of birth was September 19, 1951, attained majority on June 19, 1969, and that the partnership deed dated December 29, 1967, did not contain any provision as to how the losses would be distributed after the minor attained majority. He also noticed that no Form No. 11A indicating change in the share ratio in losses was filed by the assessee. As the partners had unequal shares in profits and losses of the firm, the Incometax Officer took the view that the assessee-firm was not entitled to registration in the absence of the redistribution of shares in losses being shown in the partnership deed. He, therefore, by the impugned order purportedly passed under section 186(1) of the Act, 1961, held that "the continuation of registration granted in earlier ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated March 18, 1979 (on pages 22-23 of the paper book). Under section 186(1), the Income-tax Officer can cancel the registration of the firm for an assessment year, if he is of the opinion that there was during the previous, year no genuine firm in existence as registered. The word "cancel " occurring in sub-section (1) of section 186, implies that the registration for the assessment year for which it is sought to be cancelled was already granted. If no registration is already granted for a given assessment year, then the question of registration being cancelled will not arise. What can be cancelled is the registration already granted for particular year and if no registration was granted, then the question of such non-existent registration being cancelled is irrelevant and meaningless. No doubt, while passing the order dated March 18, 1979, the Income-tax Officer labelled that order as an order under section 186(1), but at the end of the order in para. 5, he clearly observed that " the continuation of registration granted in earlier year is refused in the assessment year 1976-77." So it is not a case where registration granted for the assessment year 1976-77 was cancelled, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the reference. The court is not confined to the questions which the Tribunal was directed to submit. Several High Courts have held that where a question in an ambiguous and misconceived form has been referred to the High Court, it is certainly entitled to reframe it or amend the question suitably covering the real controversy borne out from the statement of the case. In CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589 (SC), the Supreme Court held that sometimes the questions are framed in such general terms that, construed literally, they might take in questions which were never in issue. In such cases, the true scope of the reference will have to be ascertained and limited by what appears on the statement of the case. Unequivocal facts as stated in the reference application and in the orders of the authorities below are that registration was granted in the beginning for the assessment year 1969-70 ; that was continued year after year for the assessment years 1970-71 to 1975-76 and that declaration in Form No. 12 for seeking continuation of registration was filed for the assessment year 1976-77, but the continuation of registration was not allowed by the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated scheme of sections 184, 185 and 186, it is manifest that registration would be granted only to a genuine firm, if the Income-tax Officer is satisfied that during the previous year, such firm continued with the constitution specified in the instrument. If for a subsequent year, the Income-tax Officer is of the opinion that there is no change in the constitution of the firm or in the shares of the partners as stated in the instrument and that a declaration in Form No. 12 has been duly furnished within time, then the registration already granted will be continued for every subsequent year under sub-section (7) of section 184. The conditions contained in sub-section (7) of section 184 are there only to ensure that a genuine firm continued with the constitution as specified in the instrument on the basis of which the registration was already granted, condition sine qua non for granting of registration under section 185. If it appears in any subsequent year that a genuine firm for which registration was granted ceased to exist, then the registration already granted will be cancelled by the Income-tax Officer. The pivotal point of these sections is the genuineness of the firm. So lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profits or losses, as evidenced in the instrument. If there is any change in either, then a firm ceases to be genuine firm. In this case, Pawan Kumar (minor), who was admitted to the benefits of the partnership, attained majority. The partnership deed dated December 29, 1967, on the basis of which registration was granted for the assessment year 1969-70 does not visualise as to how the losses will be distributed amongst the partners after the minor had become a major. The losses of the firm as per the said instrument were to be borne by the major partners only. After the minor attained majority, the shares in losses of the partners would surely undergo a change and, in fact, they did undergo a change in this case and it was argued by Sri Upadhya that after the minor attained majority, the partners agreed to share the losses in the proportion in which they had agreed to share the profits. The change is not-evidenced by any partnership deed. The question is whether despite the change in the ratio of losses, the assessee-firm was entitled to, continuation of registration on the basis of the declaration filed in Form No. 12 for the assessment year 1976-77. In Badri Narain Kashi P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shares in losses, as it has happened in the instant case in the instrument dated December 29, 1967, the presumption stated by Sri Upadhya on the basis of the Supreme Court decision will not arise. The submission of Sri Upadhya is that the shares in the losses were specified only in the instrument entered into at the inception, but no agreement as to the shares in the losses was arrived at when the minor attained majority. He, therefore, urged that the shares in the profits being unequal and there being no fresh agreement regarding sharing of the losses after the minor attained majority, it would be presumed that the partners would share the losses in the same ratio in which they agreed to share the profits. This submission is fallacious, because the existence of the agreement is not to be seen with reference to the stage when the minor attained majority but vis-a-vis the stage when the partnership came into being under the instrument. On a minor who was not liable to share the losses attaining majority, a change in the loss-sharing ratio occurred and that was not evidenced by any instrument in this case and, therefore, in view of the Full Bench decision in the case of Badri Nara ..... X X X X Extracts X X X X X X X X Extracts X X X X
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