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TMI Blog1982 (12) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... question are. The appellant-firm consisting of two partners was carrying on business in kirana goods, etc. The two parties, who are brothers, admitted their brother, who is congenitally deaf and dumb, to the benefits of the partnership. A partnership deed was executed an October 20, 1972, giving a one-third share in the profits to the said brother, but making him not liable for the losses. An application for registration under s. 184 of the Indian I.T. Act was made, signed only by the two partner-brothers. The ITO was satisfied that the application was in order and that the firm was genuine but refused registration on the ground that the admission of an adult member to the benefits of the partnership is not recognised by law; and, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the partnership, the Tribunal was in error in allowing the appeal on a ground not put forward by either party at any time. It is submitted that the partnership deed, on the basis of which registration was asked for under the I.T. Act, is invalid in law, and therefore, the registration was rightly refused by the ITO. On the other hand, it is contended by Shri G. V. R. Mohan Rao, learned counsel for the assessee, that every person who is given a share in the profits of a firm does not necessarily become a partner, and that there are several instances of a servant or an employee being given remuneration in the shape of profits., He submitted that merely by giving a share in the profits, the deaf and dumb brother did not become a partner. Reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets of the HUF were used by the firm the two brothers thought it appropriate to provide some profit to the other brother representing the interest on his share of assets used by the firm. This again is not a basis which was at any time urged before any authority or even before the Tribunal. There is no evidence to show what were the assets of the HUF business which were taken over by the present partnership. Similarly, the argument of Mr. Mohan Rao based upon s. 6 of the Partnership Act and in particular, Expln. 2, relied upon by him, is out of place. Expln. 2 to s. 6 of the Partnership Act says that the receipt by a person of a share of the profits of a business does not by itself make him a partner along with the persons carrying on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department on the ground that charity cannot be taken as a partner. When the matter came up before the Allahabad High Court, it held that the partnership deed merely provided that 1/16th share of the profits will not be distributed between the partners but would be kept in a separate charity fund. On a correct interpretation of the document, the High Court held that it is open to the partners of business to agree not to take the whole of the profits of the partnership for their personal use and to reserve a part of the profits for charitable purposes and that is exactly what the partners had done in that case. It was accordingly held that the partnership was entitled to registration. But that is not the situation here. As much as one-th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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