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TMI Blog1982 (7) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... capital of the three minors, Rafat Qaiyum, Faisal Ayub and Firoz Ayub, at Rs. 6,000, Rs. 7,500 and Rs. 6,500, respectively, but also made them liable to losses to the extent of 3 per cent, 6 1/4 per cent and 6 1/4 per cent of the losses, the instrument of partnership did not bring into existence a valid firm. The ITO also observed that in the earlier years the firm never did any business of commission agency in hides and skins and, therefore, the mention in clause 3 that the business of partnership shall continue to be that of commission agency in hides and skins was a mis-statement and, therefore, the instrument of partnership also appeared to be dubious. The ITO, therefore, came to the conclusion that there was no genuine firm in existence. The claim of registration was, therefore, refused. 3. When the matter went up in appeal, the AAC not only held that the firm as valid but also held that the claim of registration was wrongly refused by the ITO. The AAC, therefore, held that the assessee was entitled to registration if the other conditions prescribed therefor were satisfied. Aggrieved by this order of the AAC, the revenue has come up in the present appeal before us. 4. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minor Party of 11th part 6 1/4% Provided that losses including the loss of capital, if any, shall be borne by the parties hereto and the said minors in like proportion, provided, however, that the losses falling to the shares of minors shall be limited to the extent of the accumulated profits credited to the account of the minors in the books of partnership and in no case the losses in excess of such accumulated profits standing to the credit of the minors shall be borne personally by the minors. Losses, if any, falling to the share of Rafat Qaiyum, Faisal Ayub and Firoz Ayub minors, in excess of accumulated profits shall be borne by Shri Abdul Qaiyum, the party hereto of the 3rd part. " and submitted to us that this clause made the three minors liable to losses of the business of the partnership (including the profit and loss of the capital to the extent of 3 per cent, 6 1/4 per cent and 6 1/4 per cent respectively). which was against the requirements of section 30 of the Indian Partnership Act. Another point made out by Shri Upadhyay was that for purposes of income-tax, each year of assessment was separate and self-contained and, therefore, once a share of profit was credite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the partnership as hithertofore ; And whereas Shri Abdul Qaiyum, as father and natural guardian of Rafat Qaiyum, and Shri Mohd. Ayub, as father and natural guardian of Faisal Ayub and Firoz Ayub have given their respective consents for the admission of the said minors to the benefits of the partnership as aforesaid ; And whereas the parties hereto of the 1st to 11th part are carrying on since 2-7-1978 and hereby agree to continue the business in partnership under the same name and style of Muzaffar Husain Iqbal Husain with Rafat Qaiyum, Faisal Ayub and Firoz Ayub, all minors, admitted to the benefits of partnership : 1. That the parties hereto of the 1st to 11th part are partners and Rafat Qaiyum, Faisal Ayub and Firoz Ayub all minors, are admitted to the benefits of the partnership in accordance with the provisions of the Indian Partnership Act. In confirmation of these presents and in token of acceptance of the benefits conferred hereinabove on the aforesaid minors, the aforesaid Shri Abdul Qaiyum, as father and natural guardian of and on behalf of the aforesaid minor Rafat Qaiyum, and the aforesaid Shri Mohd. Ayub, as father and natural guardian of and on behalf of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir Lordships laid down that where the liabilities of the minors in the share of losses of the firm was only limited to their share in the partnership and not personally the partnership deed cannot be said to be invalid. Shri Gulati further argued before us that the discrepancy appearing in clause 3 of the instrument of partnership regarding the continuance of business of commission agency in hides and skins when no such income was shown in the earlier years, was a minor mistake of description and this will have no effect on the validity of the partnership. Summing up Shri Gulati vehemently argued before us that the AAC rightly directed the ITO to register the firm provided the other conditions in this connection are satisfied. 6. We have carefully considered the rival submissions. In view of the authority of the Supreme Court in the case of Shah Mohandas, we have no hesitation in coming to the conclusion that the condition of contribution of capital for the minor being admitted to the benefits of the partnership will not make the partnership deed invalid. It is by now well settled principle of construction, which does not admit of any dispute that in determining the question wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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