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TMI Blog1984 (4) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ted orally all along with effect from April 1, 1961, and that the partnership had not come into existence only from January 27, 1968, onwards? 2. If the answer to the above question be in the negative, was the Tribunal justified in holding that the firm was entitled to registration under the Income-tax Act, 1961, for the assessment year 1968-69 ? " Shri Rahmat Khan is a partner in M/s. New Friends Co., Dhamani Market, Jaipur. He had 12 1/2% share in the profit and loss of that firm, for the accounting period corresponding to the assessment year 1968-69 which began on April 1, 1967, and ended on March 31, 1968. Shri Rahmat Khan entered into an agreement of partnership with one Shri Faizu Khan S/o. Molabux in respect of his share of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngaged in the conduct of business of M/s. New Friends Co., on behalf of the party hereto of the first part." Shri Faizu Khan advanced Rs. 10,000 to Shri Rahmat Khan for investing the aforesaid amount in M/s. New Friends Co. The profits received from M/s. New Friends Co. by Shri Rahmat Khan was divided in accordance with the shares specified in the partnership deed between Shri Rahmat Khan and Shri Faizu Khan., The amount which was given to Shri Faizu Khan in accordance with the terms of the partnership deed was received by him. It was not appropriated by him for his own use. It may also be stated that there is no dispute that Shri Faizu Khan and Shri Rahmat Khan are not related in any manner. M/s. Rahmat Khan Faizu Khan, Bikaner (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal, however, has referred the two questions stated hereinabove for our decision. Section 4 of the Indian Partnership Act, 1932 (Act No. IX of 1932) (for the sake of brevity it will be referred to as " the Partnership Act ") defines partnership ", " partner " and " firm as under : " 4. Definition of 'partnership ' Partner ', 'firm' and 'firm name 'Partnership' is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another )re called individually 'partners' and collectively 'a firm', and the name under which their business is carried on is called the 'firm-name'." Section 6 of the Partnershi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existence. Further, the discretion conferred on him under section 26A is a judicial one and he cannot refuse to register a firm on mere speculation, but he shall base his conclusion on relevant evidence. " Section 26A of the Indian I.T. Act, 1922, and s. 4 of the Partnership Act were again examined in Agarwal Co. v. CIT [1970] 77 ITR 10 (SC). After reiterating the conditions essential for the registration of a firm as laid down in Sivakasi Match Exporting Co.'s case[1964] 53 ITR 204 (SC), their Lordships held that if the conditions essential for registration of a firm are fulfilled, the ITO is bound to register the firm unless the assessee has contravened s. 23(4) of the Indian I.T. Act, 1922. Sections 184 and 185 deal with registrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to form a partnership. It has also not been disputed that in accordance with the said agreement, Shri Faizu Khan contributed Rs. 10 000 and further Shri Faizu Khan looked after the business of M/s New Friends Co. it is also not the case of the Department that Shri Faizu Khan was a sham person who did not exist or who did not work and that he did not get the profits in accordance with the partnership deed or that he returned the profit to Shri Rahmat Khan. In our opinion, the aforesaid were the facts which were germane for determining the genuineness or otherwise of the firm. As none of them has been assailed, it cannot be disputed, in our opinion, that the partnership firm as stipulated by the above referred partnership deed had come i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guous expressions are used, the court may normally adopt that interpretation which upholds the deed, if the Parties thereto have acted on the assumption of its validity....(underlining is our own). Applying the tests laid down in the aforesaid authorities and having regard to the dominant intention of the parties and considering the partnership deed as a whole, it is clear that the parties in the partnership deed had agreed to be partners in the profit and loss on and from April 1, 1967, and the terms were reduced to writing on January 27, 1968, the date when the partnership deed came into existence. This has to be considered in the light of the following facts and circumstances regarding which no dispute has been raised on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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