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TMI Blog2001 (3) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 per cent In the partnership deed it was mentioned that Shri Ravi Sahdev had been admitted to the benefits of partnership w.e.f. 1-4-1983 and was only entitled to share of profit and not to the losses. The said Shri Ravi Sahdev S/o Shri Vasdev Sahdev had attained majority on 11-6-1983 and had elected to be a partner of the firm w.e.f. 1-4-1983. 3. On examination of the Partnership Deed the Assessing Officer found that for the period 1-4-1983 to 10-6-1983, the first 3 partners mentioned in clause 5 of the Partnership Deed were to share the profits as well as losses and the 4th partner being minor was to share only profits. The Assessing Officer came to the conclusion that in the above partnership deed there was nothing mentioned as to how the losses were to be shared between the partners for the period 1-4-1983 to 10-6-1983. Accordingly the Assessing Officer was of the opinion that since the partnership deed did not specify the manner in which losses were being shared amongst the partners concerned the firm was ungenuinely Instituted in view of the ratio of decision of Hon'ble Supreme Court in the case of Mandyala Govindu Co. v. CIT[1976] 102 ITR 1. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in their proper perspective because factually the statement of Sh. Ravi Sahdev that he did not withdraw any amount from his account was correct as no money was withdrawn for personal use by Sh. Ravi Sahdev and the withdrawals were only for making payment of the income-tax, CDS and for purchase of NSCS. As regards non-specification of the distribution of loss, for the period 1-4-1983 to 10-6-1983, it was submitted by Sh. Sud that this was not material as Sh. Ravi Sahdev had attained majority on 11-6-1983 and elected to be a partner of the firm and give retrospective effect to the profit sharing ratio as mentioned in the partnership deed. It was further submitted that in fact there was no loss for the period 1-4-1983 to 10-6-1983 and as such the question as to how it was to be distributed amongst the partners is of academic nature only and in any case if there was a loss it was to be distributed amongst the remaining 3 partners in accordance with their profit sharing ratio. 5.1 Sh. Sud relied on the decision of Hon'ble Andhra Pradesh High Court in the case of Modern Stores v. CIT[1986] 157 ITR 589. Reliance was also placed on the decision of Hon'ble Allahabad High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual aspect of the case in the impugned order dated 24-11-1988 for the assessment year 1984-85. The decision of Hon'ble Andhra Pradesh High Court in the case of Modern Stores has been rightly distinguished by the CIT(A) because in that case it was specifically mentioned that in the event of loss the four adult partners agreed to share them equally whereas there was no such stipulation in the case under appeal as Lo bow the losses for the period 1-4-1983 to 10-6-1983 were to be distributed. Similarly the decision of Hon'ble Allahabad High Court is also distinguishable as the same related to only continuation of registration and not fresh registration, which is the case before us for the assessment year 1984-85. 8. In our opinion the point in dispute is covered in favour of the revenue and against the assessee as per the ratio of decision of Hon'ble Supreme Court in the case of Mandyala Govindu Co. wherein it is held as under :--- "Held (i) that the Income-tax officer, before allowing the application for registration under section 26A of the Indian income-tax Act, 1922, must be in a position to ascertain the shares of the partners in the losses even if section 26A did not req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the assessment years are dismissed. Per S. Grover, Judicial Member.- I have closely perused the order proposed by my learned brother but find myself unable to agree with the conclusion reached by him. Several judgments of the jurisdictional High Court of Punjab and Haryana and other Courts cited at the very outset of the hearing by Shri. N.K. Sud, Advocate, as direct authorities delivered under the Income-tax Act, 1961, hereinafter referred as the Act, have either completely escaped the notice of my learned brother or have been ignored by him. 13. The facts have been correctly recorded in para 2 of the proposed order. It is evident that Shri Ravi Sahdev who was a minor on 1-4-1983, when he was admitted to the benefits of partnership constituted orally, had attained majority on 11-6-1983, Thus on 5-7-1983, when the partnership deed was executed, he was a major. Clause 1 of the Partnership Deed makes it absolutely clear that the firm as constituted under the said Deed is given effect from 1-4-1983. Clause 5 of the deed gives the profits and loss sharing ratio of the four partners. A combined reading of the two clauses clearly show that the partners had agreed to divide the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. The facts of the said case are clearly distinguishable as in the case before the Supreme Court the minor had not attained majority during the financial year under consideration. This important distinction has also escaped the notice of my learned brother. 17. I have gone through the statement of Shri Ravi Sahdev a copy of which has been placed at page 11-12 of the paper book. I find that in response to question Nos. 4 to 7 he had duly explained that he was a partner in M/s. P.M.S. Enterprises for 3 years having 15 per cent share and that he had retired in March, 1986. Thus it cannot be said that he did not know as to when he had become a partner. He also duly named the other three partners. In the light of these facts no adverse inference against the genuineness of the firm can possibly flow from his not being able to give exact date of execution of partnership deed or exact date and amount of capital investment. Such details could not possibly be remembered after four years especially when at the time of recording of the statement, he had already ceased to be a partner. The case of the assessee gets further fortified by the fact that Shri Ravi Sahdev duly stands assessed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 19-20 of the paper book projecting that they have duly been assessed in respect of their respective shares. Thus as held by the Supreme Court, the Circular of the CBDT will govern the situation and registration could not be refused. The Patna High Court in a recent case in CITV. Imperial Textiles [1993] 201 ITR 555 has also taken the same view. 22. In view of the aforesaid factual and legal position, I feel no other option but to bold that the assessee-firm is entitled to the benefit of registration for the assessment year 1984-85 and that of continuation of registration for assessment year 1985-86. 23. In the result, the appeals of the assessee are accordingly allowed. 40 Income-tax Tribunal Decisions ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 There being difference of opinion between the two Members, who heard the appeal, the following point of difference is reframed for reference to the President of the Income-tax Appellate Tribunal under section 255(4) of the Income-tax Act, 1961 :--- "Whether, on the facts and in the circumstances of the case, the proposed order of the Accountant Member dismissing the assessee's appeals can be said to be legally correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered in favour of the revenue by the decision of the Hon'ble Supreme Court in the case referred to by the Assessing Officer earlier, in the case of Mandyala Govindu Co. Even otherwise it was his view that Shri Ravi Sahdev was not aware of his being a partner of the firm as also the affairs of the firm as as that time he was Studying for Diploma in Mechanical Engineering from Ramgarhia Polytechnic. Taking in view the totality of facts and circumstances of the case, he was of the view that the revenue authorities were justified in refusing registration to the assessee-firm for the assessment year 1984-85 and equally, justified in refusing" to grant continuation of registration for the assessment. year 1985-86. 5. The learned Judicial member, however, was of the view that the assessee was entitled to the benefits of registration. According to him Shri Ravi Sahdev was minor on 1-4-1983 when fie was admitted to the benefits of partnership deed constituted orally. He attained majority on 11-6-1983. Thus on 5-7-1983, when the partnership deed was executed he was a major. Clause 1 of the partnership deed makes it absolutely clear that the firm as constituted under The said deed is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g period. Even in any case, the accounts of the assessee-firm were to be closed at the end of the financial year and there is no question of sharing the loss or profit for the period from 1-4-1983 to 10th June, 1983. It is, therefore, no more relevant to consider the minority period of Shri Ravi Sahdev as the deed which was subsequently signed contemplated closing of the accounts at the end of the financial year and such profits and losses were to be distributed on the basis of the share ratio agreed upon. There is, therefore, no reason to deny the benefit of registration to the assessee on this flimsy technical ground. Since the learned Judicial Member has given proper reason for accepting the genuineness of the partnership firm, it is submitted that his order is liable to be upheld. 7. On the other hand, Shri C.V. Rastogi, the learned Sr. D.R. supported the order of the learned Accountant Member. Keeping in view the fact that the firm allowed Shri Ravi Sahdev to be full fledged partner even during his minority period, the said firm was not genuinely constituted and the claim has been rightly rejected by the revenue and the learned Accountant Member in the light of the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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