9911796707
TMI Blog1978 (7) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee are 1959-60 and 1960-61, for which the respective relevant accounting periods are January 1, 1959, to January 31, 1959, and April 1, 1959, to March 31, 1960. Admittedly, up to 31st December, 1958, the business was a proprietary concern of one C.I. Chakko. On and from the 1 st January, 1959, the said business is said to have been converted into a partnership firm, the original proprietor and two other persons, namely, C.I. George and Baby Peters, having joined in as partners. A partnership deed was executed on the 1st January, 1959, and the same was registered under the Indian Registration Act on the 17th January, 1959. The shares of the respective partners in the partnership were as follows : C.I. Chakko 45% C.I. George 45% Baby Peters 10% For the assessment year 1959-60, application under s. 26A of the Act claiming registration of the firm was filed late on the 18th April, 1959, but has been entertained by the ITO. Similarly, the application under s. 26A of the Act for the assessment year 1960-61 was entertained, though filed late, along with the return of income, on the 27th July, 1960. The ITO refused to register the partnership for the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 1960-61 were also not divided in the books before claiming registration for the year. To put it in brief, the Tribunal's finding is that the profits for the relevant previous years were divided after the filing of the applications for registration for the said two assessment years. Learned counsel for the petitioner has submitted that the refusal to register the firm on the ground of non-division of profit was illegal because none of the provisions of the Act or the Rules required that division of profit between the partners must be made before filing the application for registration. Learned counsel for the opposite party on the other hand has submitted that the registration had been rightly refused because the assessee had failed to fulfil the requirements of the Act and the Rules. The provisions of the Act and the Rules, in so far as they are relevant for the purpose of these references are s. 26A of the Act, rr. 2 and 3 of the Rules as also the prescribed forms of application for claiming registration and renewal of registration of the firms. Section 26A of the Act reads as under : "26A. Procedure in registration of firms.--(1) Application may be made to the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that year : Provided that the Income-tax Officer may entertain an application made after the expiry of the time-limit specified in this rule, if he is satisfied that the firm was prevented by sufficient cause from making the application within the specified time. 3. The application referred to in rule 2 shall be made in the form annexed to this rule and shall be accompanied by the original instrument of partnership under which the firm is constituted, together with a copy thereof ; provided that if the Income-tax Officer is satisfied that for some sufficient reason the original instrument cannot conveniently be produced, he may accept a copy of it certified in writing by all the partners (not being minors) or where the application is made after dissolution of the firm, by all the persons referred to in the said rule, to be a correct copy, and in such a case the application shall be accompanied by a duplicate copy." The form of application for registration is Form I which is as under : "FORM I Form of application for registration of a firm under section 26A of the Indian Income-tax Act, 1922 To The Income-tax Officer, Dated 19 Income-tax year 19 19 . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portionment of the income, profits or gains (or loss) of the business, Profession or vocation in the previous year between the partners who in that previous year were entitled to share in such income, profits or gains (or loss). (Applicable where the application is made after the end of the relevant previous years.) ------------------------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------- NOTE:--(1) If the interest, salary and/or commission is payable (or allowable) only if there are sufficient profits available, this fact should be noted by marking the items in the appropriate columns with the letter 'R'. (In other cases the interest, salary and/or commission may exceed the total profits so as to leave a balance of net loss divisible in column 6). (2) If any partner is entitled to share in profits but is not liable to bear a similar proportion of any losses, this fact should be indicated by putting against his share in column 6, the letter 'P'." Lookin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile applying for initial registration of the firm. The question, however, is one of intention as to whether or not the profit or loss of the relevant previous year was meant to be divided between the partners of the firm. A belated division of profit or loss might give rise to an adverse factual presumption against the claim of registration of the firm, but surely it cannot be said to be an infringement of the requirements of law. A very old decision of the Nagpur Judicial Commissioner's Court in the case of CIT v. Kikabhai, AIR 1930 Nag 6 in which a similar question, relating to the extent of time which a firm should take to divide its profits between its partner, arose. It was decided in favour of the assessee and it was observed : "The certificate to be given is not that the profits will be divided or credited within some fixed period ; and it seems to us that when a certificate in the prescribed form is given in good faith, if the applicants do constitute a firm, that firm is entitled to be registered." In the instant case from the supplementary statement of the case it appears that the profits of the previous years relevant for assessment years 1959-60 and 1960-61 were a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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