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TMI Blog1985 (12) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 7,500 and it is a fact that such capital has been contributed by him. It is a case of a professional firm of chartered accountants in which the other two partners are Shri V.S. Dastur and Shri D.N. Shukla. In clause 7 of the partnership deed it has been provided that Shri Pardawala would be entitled to a fixed sum of Rs. 8,400 per annum by way of his share in the profits in the firm and that he will not be liable to contribute to the loss. This particular amount payable to Shri Pardawala was a charge in the profits of the firm after which only the remaining two partners would share the profits or the losses. Clauses 8 to 10 only provide an inter se arrangement amongst the partners also delineating the entitlements of the partners in regard to the assets, etc., their rights, duties, etc., in the firm's conduct. He then referred to page 37, which is the application made to the Institute of Chartered Accountants of India, wherein it has been mentioned that the firm comprises of three partners, one of whom is Shri Pardawala. In page 38 is the letter from the Institute and in page 39 is the information to the Institute of Chartered Accountants as to who are conducting the profession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n holding that Shri Pardawala was not a genuine partner. 3. On facts Mr. Dastur submitted that the Bombay High Court decision, copy of which has been filed by him, is exactly on the same issue in which case the firm of solicitor had formed a partnership and one of the partners was receiving a fixed sum as his share of profit and the Bombay High Court had held that the partnership is valid. He further relied on K.D. Kamath Co. v. CIT [1971] 82 ITR 680 (SC), R.K. Dhingra Co. v. CIT [1976] 102 ITR 643 (Bom.) on the issue of bank account operation that it is not necessary that all the partners should operate the bank account. He also relied on Brij Rattan Lal Bhoop Kishore v. CIT [1982] 136 ITR 722 (All.) and also ITO v. Gagrat Co. [1982] 2 ITD 284 (Delhi). He further submitted that the registration has been withdrawn on the basis of the Form No. 11 which was filed with the ITO, A-IV Ward, the original which was filed with the ITO, T.P. Circle, which contained all the signatures of the partners is apparently missing from the departmental file as otherwise they would have noticed that Form No. 11 has been properly signed by all the partners. Mr. Dastur submitted that it is not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nner. For the sake of convenience, clauses 7 to 10 are reproduced below : "7. The said Pardawala shall be entitled to a fixed sum of Rs. 8,400 per annum, as and by way of his share in the profits of the said partnership and shall not be liable to contribute in the losses. The said Dastur and the said Shukla shall be entitled to share the profits and/or losses of the said partnership after making provision for the fixed share of the said Pardawala as aforesaid in the shares following : (i) the said Dastur 51 per cent. (ii) the said Shukla 49 per cent. 8. The said Dastur and the said Shukla shall be entitled to the goodwill and other assets of the said partnership in equal shares. The said Pardawala shall not be entitled to have or claim any share or interest in the goodwill or other assets of the said partnership. 9. A banking account or accounts in the name of the said partnership shall be opened with such bank or banks as the parties hereto may mutually agree upon and such account or accounts shall be operated upon by any of the said Dastur or the said Shukla. All moneys or negotiable securities received for or on account of the partnership except for current expenses, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have any interest in the firm. The clients were informed of the partner being admitted to the firm as a partner and also on completion of one year that he has ceased to be so. There was dispute between the partners and the partner concerned who was receiving his share of profits on a monthly basis made a claim that he was never a partner. Their Lordships of the Bombay High Court were of the view that the manner of arrangement of the affairs between the partners by which one partner receives profits alone when all other conditions such as agreement between them, mutual agency, etc., exist, then it is only a case of partnership firm. In the case of Gagrat Co., the Delhi Bench has considered an identical issue in which case there were five lawyers who formed a partnership, one of whom was receiving a fixed monthly remuneration instead of a specific share in the profits of the business and also that he was not to share any losses of the firm. The learned Members had occasion to consider the Supreme Court decision in the case of K.D. Kamath Co. In that case the partner, who was receiving on a monthly basis, had filed a return stating that it was a salary income. Their Lordships o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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