9911796707
TMI Blog1975 (8) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... , being the accounting year relevant to the assessment year 1958-59. As from the beginning of Samvat year 2014, i.e., October 24, 1957, the firm was reconstituted. Champaklal Jamnadas and Dharamshi Manekchand retired from the firm and Ashokkumar Champaklal, the son of erstwhile partner, Champaklal Jamnadas, was brought in as a new partner. This change was effected by a deed of partnership dated January 8, 1958, and the deed was to be operative with effect from October 24, 1957. Under this deed the three partners, Manilal Jamnadas, Keshavlal Ravchand and Ashokkumar Champaklal, were to have share in the profits of the brokerage business and speculation business as indicated therein. The reconstituted firm also changed the firm name to Messrs. Manilal Jamnadas (Seeds). It was stated in the partnership deed of the reconstituted firm that this firm "shall succeed to the assets and liabilities of the said concern of M/s. Champaklal Jamnadas Co." Champaklal Jamnadas could not continue as a partner as he had become a member of the stock exchange, because as per the rules and regulations of the stock exchange, a member thereof was not permitted to be a member of a firm in which he would h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facilities to the reconstituted partnership unless Champak lal's name was associated. In order to obviate the difficulty the firm decided to open a joint account in the names of Manilal Jamnadas, Champaklal Jamnadas and Keshavlal Ravchand and not a partnership account in terms of which Champaklal's name was associated in the bank account with the Bank of Baroda Ltd. He, accordingly, took the view that the firm as constituted by the partnership deed dated January 8, 1958, was a genuine partnership and was entitled to registration for the assessment year 1959-60 and renewal of registration for the subsequent two years. On an appeal by the Income-tax Officer the Tribunal set aside the order passed by the Appellate Assistant Commissioner for all these years. So far as the last two reasons assigned by the Income-tax Officer for refusing registration were concerned, the Tribunal agreed with the finding of the Appellate Assistant Commissioner that the said reasons were either not valid or misconceived. So far as the first reason given by the Income-tax Officer was concerned, the Tribunal took a view different from the one that was taken by the Appellate Assistant Commissioner. The Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely his nominee. The Income-tax Officer was, therefore, right in holding that the firm, as evidenced by the partnership deed dated 8th January, 1958, was not genuine and in refusing to register the firm under section 26A of the Act accordingly." On these facts, the question referred to us for our determination is as under : "Whether, on the facts and in the circumstances of the case, the decision of the Tribunal refusing to grant registration of the applicant-firm is justified in law ?" Mr. Dastur, on behalf of the assessee-firm, contended that the Tribunal was not justified in holding on the material on record that the reconstituted firm evidenced by the partnership deed dated January 8, 1958, was not a genuine firm. He submitted that the Tribunal was not justified in holding that Ashokkumar was a benamidar of his father, Champaklal. He submitted that the burden to show that Ashokkumar is a benamidar or nominee of his father is entirely on the revenue and that such burden has not been discharged by the revenue. He pointed out that the particulars given in the form for opening the bank account do not show that Champaklal was a partner ; that the contention of the assessee-f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithstanding the execution of the deed dated January 8, 1958, cannot be regarded as a genuine firm. Secondly, he submitted that the contention of Mr. Dastur that Ashokkumar is not a nominee or a benamidar of Champaklal cannot be accepted. He pointed out that under clause 8 of the deed of partnership of the reconstituted firm the banking accounts of the partnership firm if and when necessary were to be opened in the name of Messrs. Manilal Jamnadas (Seeds) in such bank or banks as may be approved by all the partners and the banking account or accounts shall be operated by all or any of the partners as mutually agreed. He submitted that the new account which had been opened with the Bank of Baroda if it is to be treated as an account of the reconstituted firm, will show that it is Champaklal who is the real partner and not Ashokkumar. The particulars given in the account opening form show that all the three account holders were liable for any of the amounts that may be payable to the bank. He submitted that this circumstance by itself was sufficient to show that Champaklal continued to be a partner. In any event, he submitted that this circumstance in the alternative at least must sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the High Court has no jurisdiction to go behind or question the statement of fact made by the Tribunal. Thus, it will not be possible for us to decide this question on the assumption that Ashokkumar is a nominee or a benamidar of Champaklal. It is undoubtedly true that when a plea is raised whether a person is a nominee or benamidar of another, then the burden will be upon the party asserting such a plea to prove that fact. Such fact can be proved on such material on record as may be made available by the parties for deciding the question. It is undoubtedly true as contended by Mr. Dastur that in deciding the question whether Ashokkumar is a nominee or a benamidar of his father, Champaklal, it is a relevant fact to consider whether the profits of the reconstituted firm coming to the share of Ashokkumar had really gone to his father, Champaklal, but neither party has led any evidence on that point in the present case. Mere omission of such evidence will not be sufficient to come to the conclusion that in the absence of such evidence the issue whether Ashokkumar is a nominee or a benamidar of his father, cannot be decided. The deed of partnership in respect of the reconstituted f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner it will not be possible for us to accept the contention of Mr. Joshi that the reconstituted firm is not a genuine firm. The Income-tax Officer also was not right in stating in his order that the form while opening the bank account has been signed by Champaklal as a partner. In fact, the use of the word "partner" is referred to in the introduction which has been made by Champaklal himself, but this introduction is made by Champaklal as a partner of the earlier firm of Champaklal Jamnadas Co. As regards the names of the account holders, there is nothing to indicate that Champaklal is shown as a partner of the reconstituted firm. However, he has not only the power to operate the account but he has undertaken to pay a liability that may be subsisting at the foot of this account. It is quite clear from clause 15 of the deed of partnership of the reconstituted firm that all the assets of the earlier firm of Messrs. Champaklal Jamnadas Co., including tenancy rights and telephone lines,. have been treated as the assets of the new partnership. Thus, what is pointed out in clause 15 of the deed of partnership is that Dharamshi has retired from the said partnership firm and as it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arguments cannot be accepted. The question then to be considered is whether simply because Ashokkumar is a nominee or a benamidar of his father in the reconstituted firm, the taxing authorities and the Tribunal are justified in refusing registration of the firm or renewal thereof for the subsequent years. So far as the position in law is concerned, it is well-settled. A firm will be entitled to registration under section 26A of the Act if the following essential conditions are satisfied : 1. The firm should be constituted under an instrument of partnership, specifying the individual shares of the partners. 2. An application on behalf of, and signed by, all the partners and containing all the particulars as set out in the rules must be made. 3. The application should be made before the assessment of the firm under section 23, for that particular year. 4. The profits or losses, if any, of the business relating to the accounting year should have been divided or credited, as the case may be, in accordance with the terms of the instrument, and 5. The partnership must be genuine and must actually have existed in conformity with the terms and conditions of the instrument of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with the terms of the deed, the application for registration must fail. The Madras High Court in this case followed the ratio of the decision of the Gujarat High Court in Commissioner of Income-tax v. A. Abdul Rahim Co. [1961] 43 ITR 8 (Guj). A similar question had come up for consideration before the Supreme Court in more than one decision. In Commissioner of Income-tax v. A. Abdul Rahim Co. [1965] 55 ITR 651 (SC) the facts were that V, A and M constituted a partnership having 9 as., 5 as. and 2 as. shares, respectively. K, a nephew of V, was inducted into the partnership as a fourth partner with a 2 as. share carved out of the 9 as. share of V, and a deed was executed by the four persons. The Appellate Tribunal held that K was a benamidar of V but otherwise held that the partnership was genuine. The Supreme Court took the view that registration of the partnership deed under section 26A of the Act could not be refused on the ground that K was the benamidar of V. It is settled law that if a partnership is a genuine and valid one, the Income-tax Officer has no power to reject its registration if the other provisions of section 26A and the rules made thereunder are compli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, this decision of the Supreme Court clearly points out that the genuineness of a firm is not affected by the mere fact that one of the partners in this firm is a benamidar of some other person. The Tribunal has taken the view that Ashokkumar is a benamidar of his father, Champaklal, and it is Champaklal who will be beneficially interested in the share of Ashokkumar, but such a conclusion by itself will not be sufficient to come to the conclusion that the agreement of partnership is not a genuine deed. That such position is clear is also apparent from a subsequent decision of the Supreme Court in Commissioner of Income-tax v. Bagyalakshmi Co. [1965] 55 ITR 660 (SC). In our opinion, it is not possible for us to doubt the genuineness of the partnership entered into under the deed dated January 8, 1958, simply because it is found that Ashokkumar is a nominee or a benamidar of his father, Champaklal. Such benami status of Ashokkumar will not come in the way of the partnership being registered under the Act. Thus, in our opinion, the Income-tax Officer and the Tribunal were in error in refusing registration of the assessee-firm. Thus, the question referred to us is answered in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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