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TMI Blog1982 (4) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... nds, the same will be contributed by the partners as per mutual agreement. The actual contribution of capital made by the three partners referred to above are Rs. 752, Rs. 1,152 and Rs. 752 respectively. The ITO observed that the assessee did business on huge scale producing a business income of Rs. 1,22,156 with the paltry capital of Rs. 2,656. He also noted that the business premises of the assessee was given as 'Yusuf Mansion', 4th floor, 204, Khetwadi Back Road, Bombay-4" but the tenancy of that premises was in the name of Shri Yusuf Muchhala, husband of Mrs. U.Y.Muchhala, one of the partners of the assessee firm. The ITO further noted that though the assessee had claimed to have employed eight persons, the office premises at Yusuf Mansion was so small that no more than two persons would afford to work there. It appears that the Inspector had visited there thrice but did not find any employee working there. Regarding the orders procured by the assessee, the ITO found that the assessee had paid labour charges almost entirely to one concern, namely, Leaders Press Pvt. Ltd. This amount was paid for getting the orders procured by the assessee and printed in the said press. He furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the alleged Partnership Deed had lost all its meaning once the main clause as to the contribution of capital and refund of excess withdrawn stand violated. From the above, he came to the conclusion that the assessee was not a genuine firm and so was not entitled to registration under s. 185 of the IT Act, 1961. According to him, the income of the assessee needs to be taxed in the hands of Shri T.H. Muchhala of Leaders Press Pvt. Ltd. However, he made the assessment taking the status of the assessee as an Association of Persons. 3. The assessee appealed to the CIT(A) and contended that the ITO erred in his decision. The CIT(A) examined each of the six points recorded by the ITO, one by one, and also cumulatively. He found that the reasons recorded by the ITO did not lead to the conclusion that the assessee firm was not genuine. He found that the assessee-firm had actually deposited some money for securing accommodation and that in the interregnum it used the premises at 204, Khetwadi back Road, while the actual work of the assessee firm was carried on at the premises of the Leaders Press Pvt. Ltd. That fact explained the absence of the employees at 204, Khetwadi Back Road, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the right type of paper and ink, got this job done through M/s Leaders Press Pvt. Ltd. Under the supervision of its own employees. After the products were ready, it was the assessee-firm who delivered them to their clients and collected the bills. They paid the normal charges to M/s Leaders Press Pvt. Ltd. He admitted that M/s Leaders Press Pvt. Ltd., did lend a helping hand to the assessee-firm which was a new concern trying to get even a business premises. He stated that it was difficult to get business premises but the assessee had already deposited a sum of Rs. 45,000 with Todi Industrial Estate for getting its own accommodation and in the meantime it was using the business premises at 204, Khetwadi back Road, but actually its work was carried on at the Leaders Press Pvt. Ltd., or the employees were doing outdoor work delivering the products. He pointed to the statement at p.85 of the compilation, which showed that M/s Leaders Press Pvt. Ltd., was suffering heavy losses during the calendar years 1973, 1974 1975. It was after Shri T.H. Muchhala took over as Managing Director and the assessee-firm decided to get its jobs printed in that press that the said company started ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n show- 1. That the funds to acquire the property, namely, the share capital contributed by the partners in the present case, did not come from their own funds but actually came from somebody else and also pointed to the person who actually gave such funds; 2. That the person who is in control of the assets of the firm or was the custodian of the title deeds was somebody else than the partners of the assessee-firm. 3. That the usufruct of the property, namely, the profits earned from the business carried on by the assessee in this case, were not enjoyed by the partners themselves but by somebody else. (Vide the decision of the Supreme Court in the case of Jaydayal Poddar AIR 1974 (SC) 171). Applying the above tests to the present case, we find that none of the above points have been established by the Revenue. The assessee is a valid partnership firm in the eye of law. It has been constituted under an instrument which has been registered with the Registrar of Firms. The partners have contributed their capital apparently out of their own funds. There is nothing on record to suggest that the initial capital invested by the partners came from Shri T.H. Muchhala or M/s L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this reasoning, he made an ad hoc addition of Rs. 30,000 to cover up any possible omission by the assessee. 10. The assessee claimed a sum of Rs. 34,750 as salary and gave the particulars vide details at page 96 of the compilation. The ITO observed that the business premises of the assessee was not enough to accommodate more than two persons and so the assessee could not have employed as many as eight persons. Besides, the salary payments where not supported by any register or vouchers. Hence, he made a disallowance of Rs. 15,000 on estimate. 11. The assessee claimed a sum of Rs. 5,089 as staff welfare expenses. The ITO observed that these were spent on tea, coffee, lunches, etc., in a particular tea house. However, there were no dates against some cash payments. Hence, he disallowed a sum of Rs. 5,000 out of the same. 12. The assessee claimed a sum of Rs. 5,791 as miscellaneous expenses. The ITO found that the sum constituted of monthly payment of Rs. 250 for the use of a typewriter and contribution to Satya Narayana Pooja of Rs. 557 and certain other items for which no specific vouchers were available. He, therefore, disallowed a sum of Rs. 3,000 of this item. 13. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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