9911796707
TMI Blog1981 (3) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... nership of the five partners after the retirement of Shri Srinarain Daga. The ITO, however, did not accept that there was a change in the constitution of the firm on March 31, 1968, on account of the retirement of Sri Srinarain Daga. He held that the four partners retired on August 4, 1968. The ITO, further, held that there was no proper ascertainment of profits of the firm for the two different periods and that the shares were not allocated between the partners of the originally constituted firm according to their shares in the deed of April 23, 1966. The ITO, accordingly, refused registration under s. 185(1)(b) of the I.T. Act, 1961. Aggrieved by the aforesaid decision, the assessee went up in appeal before the AAC. It was submitted on behalf of the assessee before him that the profit sharing ratio could not be in accordance with the original partnership deed of April 23, 1966, as Sri Srinarain Daga had retired, according to the assessee, on March 30, 1968. The assessee also filed a copy of the notice of Sri Srinarain Daga dated February 5, 1968, by which he had purported to retire from April 1, 1968. The AAC was of the view that these facts were inconsistent with the declarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was any mistake in allocating the shares between the parties up to August 4, 1968. Rather, the assessee's case, according to the Tribunal, before the AAC was that Sri Srinarain Daga had retired on March 30, 1968, in pursuance of the notice dated February 5, 1968. The assessee did not correctly ascertain the profits for the last period according to the mercantile system which it followed and, consequently, for this period also there was no proper allocation of profits between the partners as per the deed of August 5, 1968. For the reasons aforesaid, the Tribunal was of the view that there was no case for interference with the order of the AAC, The appeal by the assessee was, accordingly, dismissed. Out of the aforesaid facts, the following question has been referred to this court under s. 256(1) of the I.T. Act, 1961 : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee's claim for registration was rightly refused ? " In order to appreciate this question it is necessary to bear in mind certain facts. There was a deed of partnership dated April 23, 1966, comprising of six partners. It is alleged th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a situation when an application is made after the end of the relevant previous year. Rule 24 enjoins that where there was no change, there should be a declaration furnished under sub-s. (7) of s. 184 in the prescribed form and shall be verified in the manner indicated therein and shall be signed in a certain manner. It is not necessary for us to set out in extenso the provisions of the said application form, viz., Form No.11A. We may refer to cls. (2) (3) of Form No.11A as well as to cl. (4) of the said application which read as follows: "Form No.11 A (2) The original/certified copy of the instrument or instruments evidencing the partnership in existence from time to time during the previous year up to the date of this application/during the previous year and up to the date of this application, together with a copy/duplicate copy of each is enclosed. The prescribed particulars are given in the Schedule on the reverse. (3) We hereby declare that none of the partners of the firm was, at any time, during the previous year, up to the date of this application, in relation to the whole or any part of his share in the income or property of the firm, a benamidar of any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, if so, on what terms ? Under sub-s. (8) of s. 184, if there is any change in the previous year, the firm shall apply for a fresh registration for the assessment year concerned in accordance with the provisions of that section. That undoubtedly has been done in accordance with the provisions of Form No. 11A. Form No. 12 was inapplicable because that can only be used in case sub-s. (7) of s. 184 applied and that is, where, as provided, there was no change in the constitution of the firm. On either view, the retirement of Sri Srinarain Daga, on. March 30, 1968, is the claim of the assessee and this was not accepted by the Revenue and on the basis that the new partnership deed was executed on August 5, 1968, there was a change during the relevant previous year in the constitution of the firm. Therefore, sub-s. (7) of s. 184 could not have any application. Sub-section (7) of s. 184 would be the proper section. It is true that the adjustment in the books of account was not in accordance with the partnership deed dated April 23, 1966, which was prevailing up to August 4, 1968. It was, on that basis, the assessee was contending that Srinarain Daga had retired, in fact, with effect from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere, on the part of a firm, there had been such a failure, as mentioned in s. 184, the ITO might refuse to register the firm for the assessment year. Para. 3 of Form No. 11A prescribes for applying for registration. It is clear from the said clause of the para that the partners have to certify that the profits of the previous year were or will be divided. The form did not prescribe that the profits of the previous year had been already or should have been divided. It is also evident from the provisions of s. 184(4) that it was not necessary to divide the profits before making the application. The I.T. authorities, according to the Division Bench of the Punjab Haryana High Court, could not refuse to register a firm if the application was made in accordance with the provisions of ss. 184 and 185 read with rr. 22 and 25 on the ground that the profits of the firm had not been divided by the partners. We are in respectful agreement with this conclusion of the Division Bench of the Punjab and Haryana High Court. Incidentally, we may mention that more or less the same view was reiterated by the Division Bench of the Kerala High Court in the case of V. K. Kurien K. P. George v. CIT [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e divided the previous year's profits before it made its application for renewal. This decision was considered by the Punjab Haryana High Court in the case of CIT v. Mothooram Premchand [1979] 120 ITR 279, where at page 288, the Division Bench of the Punjab Haryana High Court rightly pointed out that that decision of the Supreme Court did not deal with the registration of a firm but it was a case of renewal. There, the facts were entirely different and specially in this case one has to bear in mind that the application in Form No. II A had been made before the end of the relevant previous year. Our attention was also drawn to the observations of the Supreme Court in the case of Sri Ramamohan Motor Services v. CIT [1973] 89 ITR 274, and reliance was placed on the observations of the Supreme Court in the case of Rao Bahadur Ravulu Subba Rao v. CIT [1956] 30 ITR 163, where the Supreme Court reiterated the same principles. But the said observations do not, in our view, militate against the view that we are taking in this case. The Supreme Court, we are in respectful agreement, rightly pointed out that the statute must be construed with regard to the conditions under which registrat ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
