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TMI Blog1979 (10) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... gannath Prasad which consisted of five partners and was constituted under a partnership deed, executed on the 1st of June, 1968. The partners' respective shares were: (1) Gurdeo Prasad 20% (2) Jagannath Prasad 25% (3) Jamuna Prasad 20% (4) Harihar Prasad 20% (5) Baijnath Prasad 15% Clause (6) of the partnership deed made provision for the continuance of the firm even in the event of the death of any partner, and provided that on the death of a partner, his heirs, legal assigns or successors-in-interest would ipso facto become a partner in the firm. Clause (7) of the deed of partnership provided for dissolution of the firm by mutual consent or by two months registered notice by any of the partners to the others. This firm was reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed was that there was a change in the constitution of the firm within the meaning of s. 187(2) of the I.T. Act. On this view he made a single assessment on the firm. As respects the registration applied for by the new firm on the basis of the new partnership deed, he found that although in para. (2) of the partnership deed of the 18th October, 1972, Jagannath Prasad, Jamuna Prasad and Harihar Prasad had shares in the ratio of 40%, 30% and 30%, respectively, the profits had been divided in the ratio of 25%, 25% and 25%. On this view the ITO held that no genuine firm had come into existence. The appeal filed by the assessee failed. Thereafter, the matter was taken up before the Tribunal. From the order of the Tribunal it appears that the diss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mutually agreed to such a dissolution. Clauses (6) and (7) of the deed on which counsel for the department placed much reliance are of no avail because the partners had mutually agreed to dissolve the partnership. We need not quote cl. (6), for, that provides for continuance of the firm in the eventuality of death of one of the partners and as in the present case none of the partners has died cl. (6) does not affect the issue. We will extract cl. (7) of the deed which runs as under: " That the partnership is at will and will be dissolved by mutual consent or by two months' registered notice by any of the parties to the others. " It will be noticed that this provision indicates that the partnership is at will and can be dissolved by mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion is whether the assessment had to be made in the status of a registered firm or otherwise. The main ground given by the ITO for refusing the registration for this period, apart from the fact that he held that the old firm continued, is that the shares in the profits had been allocated not in proportion to the shares of the partners as set out in the second deed of partnership. From the order refusing registration it does not appear that the assessee tried to explain this anomaly before the ITO. When the matter came up before the Tribunal, the assessee gave an explanation and that was to the effect that the allocation of shares had been made under a mistake which was rectified by passing reverse entries immediately when the mistake was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In that case, profits earned in the black market had been distributed amongst the partners although they had not been shown in the books. It was held that the firm was not entitled to registration as in such cases the certificate given by the firm that the profits had been distributed in accordance with the partnership deed would be false. The decision in Setha Ram Dhanvir Singh v. CIT [1980] 123 ITR 150 (All) has to be read in the context of the facts of that case. In that case the assessee's explanation that the discrepancy in the allocation of profits of the firm was due to a mistake, had been repelled by the Tribunal on the ground that the explanation was an after-thought. In the present case this is not so. The assessee's explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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