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TMI Blog1980 (7) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... rtners, the seventh being Vinodrai (minor) who was admitted to the benefits of the partnership. The proportions in which the major partners and Vinodrai were to share the profits were specified in the partnership deed executed on October 30, 1963. Vinodrai, being a minor, was not to share any loss which was to be borne by the six major partners in a certain proportion specified in the deed. The accounting year of the firm was from Diwali to Diwali and before the end of Diwali of 1964, the reconstituted firm applied for registration under s . 184 of the I.T. Act, 1961 (hereinafter referred to as " the Act "). The ITO granted registration under s. 185(1)(a) of the Act. The assessments for the years 1965-66 and 1966-67 were made on the basis of this registration of the firm as constituted under the partnership deed dated October 30, 1963. On August 28, 1966, Vinodrai attained majority and opted to become a fullfledged partner in the firm. A deed of partnership was, therefore, executed on that day, and thereby Vinodrai confirmed the terms and conditions of the partnership deed executed on October 30, 1963. Now, under the partnership deed dated October 30, 1963, Vinodrai being a minor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d August 28, 1966, brought about a change in the constitution of the firm and, hence, the application in Form No. 11A should have been filed in time and since this was not done, the registration was refused. The petitioner-firm moved the AAC against these two orders of the ITO. Before the AAC it was contended by the firm that Vinodrai was already a partner of the firm during his minority and even after attaining majority he elected to continue as partner and, hence, there was no change in the shares or the constitution of the firm and the only change was that Vinodrai attained majority. It was further contended that though it was not necessary to execute a fresh deed of partnership on Vinodrai attaining majority, a deed was executed on August 28, 1966, as a measure of abundant precaution and filed before the ITO on March 14, 1969. It was, therefore, submitted by the firm that since there was no change, the ITO was not justified in refusing the renewal of the registration or at least the registration of the firm. However, this submission did not weigh with the learned AAC, who upheld the view taken by the ITO. The AAC held that the business of the partners underwent a material cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly change, which if at all could be said to be a change, was the change in the proportion in which the partners were to share the loss, as under the deed of 1963, only six partners, were to share the loss in certain proportion while under the deed of 1966, seven partners had to share the loss including Vinodrai. However, according to Mr. Thakar, the change in the shares in loss would not be change of shares in profit within the meaning of the first proviso to sub-s. (7) of s. 184 of the Act. For this proposition Mr. Thakar has relied on two decisions of a Division Bench of this court, In re Parekh Wadilal Jiwanbhai [1961] 42 ITR 266 and Imdad Ali v. CIT [1972] Mah. LJ 285; [1972] Tax LR 655. According to Mr. Thakar, since on the facts of the case, the first proviso to sub-s. (7) of s. 184 was not attracted, the ITO ought not to have treated the petitioner-firm as an unregistered firm and should have given the benefit of the substantive provision contained in sub-s. (7) of s. 184 and should have allowed the firm to have the benefit of the earlier registration for the subsequent assessment years also. Mr. Thakar submitted that the phrase " change in the constitution of the firm " ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Badri Narain Kashi Prasad v. Addl. CIT [1978] 115 ITR 858. According to Mr. Shelat, at the time when the AAC passed the order, the decision of the Allahabad High Court in Ganesh Lal's case [1968] 68 ITR 696 was holding the field and, relying on that decision, the AAC held against the petitioner-firm, and it could not be said that there was an error apparent on the face of the record and, therefore, no interference in writ petition was called for Mr. Shelat, relying on the decision of the Kerala High Court in CIT v. Best Automobiles [1979] 117 ITR 877, also submitted that as the registration of the firm confers certain benefits on the firm, strict compliance with the provisions of the Act and the Rules requiring registration is necessary and substantial compliance with the requirement of the section would not suffice. Mr. Shelat, therefore, submits that as required by sub-s. (4) of s. 184, the application for registration in Form No. 11A was required to be made before the end of the previous year for the assessment year, viz., 1967-68, and as this application was not made within the time so specified, there was no compliance with sub-s. (4) of s. 184 and hence the question of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient cause from furnishing the declaration within the time so allowed, he may allow the firm to furnish the declaration at any time before the assessment is made. " Sub-section (8) states that where any change has taken place in the previous year, the firm should apply for fresh registration for the assessment year concerned in accordance with the provisions of the section, viz., s. 184. Section 185 then provides for the procedure to be adopted by the ITO on receipt of the application for registration. He has to pass an order registering the firm, if he is satisfied that there is or was during the previous year in existence a genuine firm with the constitution so specified or he has to pass an order refusing to register it if he is not so satisfied. Section 186 provides for the cancellation of a registration and sub-s. (1) thereof provides that where a firm has been registered, or its registration has effect under sub-s. (7) of s. 184 for an assessment year, and the ITO is of opinion that there was during the previous year no genuine firm in existence as registered, he may, after giving the firm a reasonable opportunity of being heard and with the previous approval of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment of majority by Vinodrai and on his joining the firm as a major partner and agreeing to share the losses, there was any change in the constitution of the firm or in the shares of the partners. As stated earlier, the phrase " change in the constitution of the firm has been defined in sub-s. (2) of s. 187. However, it has to be remembered that by virtue of this sub-section, the definition is for the purposes of s. 187. The Legislature has not extended this definition to apply generally to all the provisions of the I.T. Act, 1961, or particularly to the sections incorporated in Sec. B of Chap. XVI which deal with registration of the firm. Strictly speaking, therefore, this definition would have to be restricted to s. 187 only. However, since the same phrase occurring in the first proviso to s. 184(7) has not been defined or explained anywhere, it would not be inappropriate to derive assistance from the definition contained in s. 187(2) for the purpose of construing this phrase in that proviso. If the Legislature uses words or phrases in a certain provision of the enactment with a certain meaning, the same meaning can be attributed to those words and phrases occurring in other p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of s. 187 is not applied to the first proviso to s. 184(7), the same result would follow in view of the definition of the term " partner " in s. 2(23) of the Act. Even for the purpose of that proviso, there would be no change in the constitution of the firm, if a minor admitted to the benefits of the partnership continues in the partnership on attaining majority as even before his attaining majority he was deemed to be a partner of the firm. Applying this test to the present case, it would be clear that when Vinodrai attained majority and elected to join the partnership on August 28, 1966, by executing a deed, there was no change in so far as the constitution of the firm was concerned, meaning thereby the number of partners and the identity of the partners. Admittedly the original six major partners continued to be the partners and the only change was that Vinodrai having become major agreed to share the loss which he could not have done during his minority. Therefore, in this view of the matter, there is no difficulty in holding that there was no change in the constitution of the firm within the meaning of the first proviso to s. 184(7). That takes us to the question whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT [1976] 102 ITR 1. There also one of the questions which fell for consideration of the Supreme Court was whether in the absence of a specific statement in the instrument as to the proportion in which the partners were to share the losses, the requirement of s. 26A can be said to have been satisfied. The Supreme Court took note of the conflict of decisions of the High Courts and referred to the above-said three decisions of the Mysore, Allahabad and Gujarat High Courts and also to a decision of the Kerala High Court in C. T. Palu Sons v. CIT [1969] 72 ITR 641, which followed the view taken by the Gujarat High Court in Thacker's case [1966] 61 ITR 540. The Supreme Court, however, did not resolve this conflict of views of the High Courts on this point and left the question open as, in its view, the case before it could be decided on facts. It would thus appear that there is no pronouncement of the Supreme Court on this question and the decision of this court in Imdad Ali's case [1972] Tax LR 655, holds good so far as this court is concerned. It would, therefore, appear from the discussion above, that what is contemplated by shares of partners within the meaning of the first p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attaining majority, a change takes place in the constitution of the firm and the firm must apply for fresh registration under s. 184(8) of the Act. Now, this view of the Division Bench of that court has been disapproved by the Full Bench of that court in Badri Narain Kashi Prasad v. Addl.CIT [1978] 115 ITR 858. We find that the Full Bench has taken the same view, which we have taken earlier. As already stated above, Mr. Shelat has contended that the AAC followed Ganesh Lal's case [1968] 68 ITR 696 (All), because at the time when he passed the order that was the only case in the field on the point, and, hence, it could not be said that he was wrong in taking that view. However, we need not go into that question for the simple reason that the matter had not stopped at the stage of the order passed by the AAC. It went further in revision to the Addl. Commissioner who confirmed the appellate order after recording a speaking order. We may only refer to the decision of the Supreme Court in CIT v. Amritlal Bhogilal Co. [1958] 34 ITR 130, in which the Supreme Court has observed that if an appeal is provided against an order passed by a Tribunal, the decision of the appellate authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abovesaid decision of the Supreme Court. As stated earlier, the decision in Mandyala's case [1976] 102 ITR 1 (SC), on its own showing, proceeds on the facts of that case. It is true that there are observations in that case to the effect that it is necessary for the ITO to know what are the respective shares of the partners in the losses and, hence, a statement to that effect must be contained in the application for registration even though the partnership deed is silent on this point. The case before the Supreme Court was one of registering the partnership under s. 26A of the Act of 1922 on the attainment of majority by one of the partners. There, an application for registration was made in Form No. 11 A and though the deed of partnership was silent as regards the shares of losses, no mention had been made in the application Form No. 11A in that respect. The position here is quite different. Here, in so far as the application of s. 184(7) is concerned, the registration is already there on the basis of the partnership deed of 1963. It is true that in 1966 there has been a change in the shares of losses, but it would not be difficult for the ITO, while finalising the assessment for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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