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TMI Blog1980 (1) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... Sarmah and Krishna Kumar Sarmah. Shri Purnananda Sarmah is the father of the 3 other partners. The partnership was evidenced by a registered partnership deed. Shri Ved Prakash Sarmah, minor son of Shri Purnananda Sarmah, was admitted to the benefits of the partnership by mutual consent of the partners with effect from November 12, 1976. In so far as the sharing of profits and losses of the partners and sharing of profit by the minor admitted to the benefits of the partnership are concerned, they find place in cl. 9 of the partnership deed at page 7 of the paper book. It reads: " 9. That the net profit or loss (as the case may be) of the firm in an year as mentioned above the share of the partners and the minor admitted to the benefits of the partnership shall be as under : Partners Share in Profits Loss 1. Purnananda Sarmah 20% 25% 2. Omprakash Sarmah 20% 25% 3. Vijoy Kumar Sarmah 20% 25% 4. Krishna Kumar Sarmah 20% 25% 5. Ved Prakash Sarmah 20% Nil But as and when the minor above named attains majority and becomes also a partner in the firm, in accordance with the provisions of section 30(5) of the Indian Partnership Act, 1932, the share of all the then pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o remain as minor getting the benefits of the partnership and that the firm was entitled to registration for the year 1968-69. The revenue preferred an appeal against the order of the AAC's decision and the Income-tax Appellate Tribunal, Gauhati Bench, Gauhati, by its order dated June 6, 1975, in I.T.A. No. 155 (Gau) of 1974-75, allowed the appeal and restored the order of the ITO. The Tribunal held that Shri Ved Prakash, a minor, was admitted to the benefits of the partnership with effect from November 12, 1966, and he was sharing 20% of the profits only but Ved Prakash attained majority on August 31, 1967, and continued to remain as a minor till the end of the accounting period of Deewali Samvat 2023 (November 12, 1966 to October 31, 1967), relevant to the assessment year 1968-69. It also noted that on attaining majority with effect from August 31, 1967, Shri Ved Prakash along with the other partners executed a memorandum of agreement dated October 31, 1967, wherein Ved Prakash consented to become a partner along with the 4 other partners with effect from Deepawali year Samvat 2024 (commencing from November 1, 1967) sharing profits and losses equally with the other 4 partners. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship as a minor and share only profits at the rate of 20%. It will be seen on a perusal of cl. 9 of the partnership deed that the instrument of partnership took care in respect of the period commencing from September 1, 1967, to October 31, 1967, in so far as Ved Prakash was concerned. The instrument does not show any change in the share in profits and losses of the partners and/or Ved Prakash in the assessment year in question and also provides that Ved Prakash would become a major partner only from November 4, 1967, onwards. Ved Prakash also agreed to accept the position by a memorandum of agreement dated October 31, 1967, entered between him and the other partners. The Tribunal held that Ved Prakash did not opt to become a partner of the firm during the period September 1, 1967, to October 31, 1967, after he had attained majority but instead opted to become a full-fledged partner of the assessee-firm only from the beginning of the succeeding previous year and accordingly the Tribunal held that the assessee-firm was not entitled to registration under s. 185(1)(a). The Tribunal has held that the assessee-firm is not entitled to registration u/s. 185(1)(a) of the Act as Ved P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... register the firm. It is settled law that if a partnership is a genuine and valid one and the provisions of the Act and the rules pertaining to registration are complied with, the I.T. authority has no jurisdiction to reject the claim for registration. The jurisdiction of the I.T. authority is confined to ascertain, (i) whether the application for registration is in conformity with the provisions of the Act and the rules framed thereunder, and (ii) whether the firm shown in the document is bogus or has no legal existence. Though the application for registration has strictly to be in conformity with the Act and rules, the deed of partnership has to be reasonably construed. The cumulative effect of ss. 184 and 185 of the Act read with the relevant rules is that if the application for registration made by a firm gives the requisite particulars prescribed by ss. 184 and 185 of the Act and the Rules, the ITO cannot reject the prayer, if there is a firm in existence; a firm may be said to be not in existence if it is a bogus or in other words not a genuine one or if, in law, the constitution of the partnership is void. Therefore, the limit of jurisdiction of the I.T. authorities is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. There is no finding that the firm was not in existence. A firm is said to be not in existence if, (a) it was a bogus and not a genuine one, or (b) in law the constitution of the partnership was void-vide CIT v. Sivakasi Match Exporting Co.[1964] 53 ITR 204 (SC).However, we do not find anything in the order of the Tribunal that the firm was not in existence, on either of the counts set out above. There is no finding that the minor was treated as a full-fledged partner. On the other hand, we find that the minor was admitted to the benefits of partnership, as required under s. 30(1) of the Act, with a rider that when the minor would attain majority during the assessment year he would enjoy the benefits of partnership and could admit himself as a full partner on and from November 1, 1967. Ved Prakash, it is the common case of the parties, expressed in clear terms that he was a full-fledged partner on and from November 1, 1967, according to the prescriptions contained in the partnership deed. Now, the only question is the effect of his attainment of majority during the assessment year in question. Was it absolutely necessary for "such person" to express clearly his intention to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efits of partnership, and (b) his share in the property and profits of the firm shall be the share to which he was entitled as a minor. (8) Where such person elects not to become a partner, (a) his rights and liabilities shall continue to be those of a minor under this section up to the date on which he gives public notice, (b) his share shall not be liable for any acts of the firm done after the date of the notice, and (c) he shall be entitled to sue the partners for his share of the property and profits in accordance with sub-section (4). " It will be seen that on attaining majority a minor admitted to the benefits of the partnership, has two options open to him : (1) he may elect to become a partner in the firm, or (2) he may repudiate or elect not to become a partner. If he elects to be a partner, he need not do anything nor give any public notice. On the expiry of the six months he becomes a partner of the firm. If a minor on becoming a major and knowing that he had been admitted to the benefits of a partnership keeps silent thereafter and fails to give the requisite public notice his inaction tantamounts to election to become a partner and he becomes liable for all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aspects of the matter. While considering the question of election by Ved Prakash the Tribunal shall also consider the effect of absence of repudiation of the partnership by Ved Prakash or his failure to sever connections with the firm. It will also be pertinent for the Tribunal to consider the proviso to sub-s. (5) of s. 30 of the Partnership Act. The Tribunal shall consider whether there is any material to show that Ved Prakash had given any public notice and the effect of his failure to serve any such notice within the period of six months from the date of his attaining majority. It is clear that the attention of the learned Tribunal was not drawn to the relevant provisions contained in s. 30 of the Partnership Act in consequence whereof the learned Tribunal has drawn a conclusion and decided the appeal without considering the pertinent provisions of s. 30 of the partnership Act. In view of the non-consideration of the relevant provisions of the Partnership Act as alluded and in view of non-consideration by the Tribunal as to whether the firm was a bogus one or had no legal existence, we are constrained to hold that the refusal of registration by the Tribunal amounted to refusal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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