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TMI Blog1976 (5) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee-firm was entitled to the renewal of registration for the assessment years 1963-64 and 1964-65 ? " The assessee was originally constituted under a partnership deed dated 18th September, 1956, consisting of four partners, namely, Sri Madan Lal, Sri Krishna, Sri Satish Chandra and Sri Jagdish Chandra and three minors, namely, Sri Harish Chandra, Sri Girish Chandra and Sri Vijai Kumar, admitted to the benefits of the partnership. Registration was granted to the firm under section 26A of the Indian Income-tax Act, 1922, for the assessment year 1959-60 and the same was renewed from year to year up to the assessment year 1961-62. The Income-tax Officer while scrutinising the accounts for the assessment year 1962-63 found that the loss was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange in the constitution of the firm where all the partners continue with a change in their respective shares or in the shares of some of them. It was urged that since Harish Chandra attained majority there was a change in the shares of losses, it should be taken as a change in the shares of the partners within the meaning of section 187(2)(b). The Tribunal, on the argument advanced on behalf of the department, posed the question in the following manner : " A fresh partnership deed was executed only on 28th July, 1964. However, the question that arises for determination is as to whether there was a change in the constitution of the firm within the meaning of section 187(2) of the Income-tax Act, 1961, so as to require the execution of a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proviso to section 184(7) means shares in both profits and losses and if there is change in the share of loss and it is not evidenced by the instrument of partnership then it amounts to a change in the shares of the partners as contemplated in section 184(7), and the Tribunal in dismissing the appeal of the department has committed an obvious error of law. A firm has been defined in section 2(23) of the Act. It is considered as an independent entity for the purposes of assessment. Chapter XVI contains special provision for assessment of registered firms. Sections 182 and 183 provide the manner in which the assessment shall be made. Section 184 read with rules 22 to 25 lays down the requisites which entitle a firm to get registration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners " used in section 184(1)(ii) and 184(7)(i) have been used in the same section and should, therefore, be given the same meaning. Identical phrase was used in section 26A of the Indian Income-tax Act of 1922. While interpreting this provision their Lordships of the Supreme Court held in R. C. Mitter and Sons v. Commissioner of Income-tax [1959] 36 ITR 194, 198 (SC) : " It is manifest that for a true and proper construction of the relevant provisions of the Act, relating to registration of firms, sections 26, 26A, and 28, and the rules summarized above, have to be read together. So read, it is reasonably clear that the following essential conditions must be fulfilled in order that a firm may be held entitled to registration : 1. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Govindu's case [1976] 102 ITR 1 (SC) on which reliance has been placed by the counsel for the department. The Supreme Court, after noting the conflict on this aspect, did not decide the question as it was of the opinion that, on the facts of that case, the appeal was bound to fail. The facts in that case were that an instrument of partnership was executed on 5th of January, 1959, and it mentioned three persons, Mandyala Narayana, Mandyala Venkatramaiah, Mandyala Srinivasalu and a minor, Mandyala Jaganmohan, who was admitted to the benefits of the partnership. The shares held by the partners were Narayana 31 per cent., Venkatramaiah 23 per cent., Srinivasalu 23 per cent. and minor, Jaganmohan, 23 per cent. In view of this fact it was held- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been a change in the constitution of the firm or in the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted. It is not necessary to decide for the purposes of this case whether there was a change in the constitution of the firm as we are of the opinion that in view of the decision given by the Supreme Court in Mandyala Govindu's case [1976] 102 ITR 1 (SC), which applies with full force to the facts of the case, there was a change in the shares of losses and, therefore, the assessee was not entitled to renewal of registration. It cannot be disputed that after Harish Chandra had attained majority there was a change in the shares of the losses of the partners. The proportion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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