9911796707
TMI Blog1981 (7) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... f registration to the assessee firm for the assessment year under consideration. 2. The ITO did not allow registration to the firm u/s 185 for the asst. yr. 1976-77. For the asst. yr. 1977-78 he however, refused the benefit of continuance of registration in terms of s. 184(7) of the IT Act, as registration for the base year i.e. asst. yr. 1976-77 had not been granted. 3. For the asst. yr. 1976-77 the claim of registration was refused by the ITO for the following reasons: 1. The partnership came into force w.e.f. 14th November, 1974. One of the partners i.e. Smt. Koshalya Bai did not contribute any capital on 14th November, 1974. An amount of Rs. 5,000 each was deposited by her with the firm on 16th November, 1974 and 18th November, 1974 only. The contribution of Rs. 10,000 which was deposited subsequently was only an after thought. Even the amount of Rs. 10,000 brought by her was a gift from Shri Gopal Lal, one of the partners and, therefore, did not contribute even any capital of her own nor contributed any skill in the business of the firm. Therefore there was no consideration for the partner as such. 2. She was made partner by reducing 20% share of the existing partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to effect or on any subsequent date. It was also urged that contribution of capital or skill or labour is not essential for constituting a valid and genuine partnership. Undertaking responsibility of sharing the losses constituted consideration for making a valid partnership. It was, therefore, urged that all the ingredients of a valid partnership were present in the case of the assessee and the firm was, genuine. In support of the above contention, the ld. counsel of the relied upon the decision of the IT Appellant Tribunal, Jaipur Bench, Jaipur in ITA No. 1649/JP/79 for the asst. yr. 1975-76 in the case of ITO, B-Ward, Jodhpur vs. M/s Prakash Sales Agency, Jodhpur and the reliance was placed on the following observations of the Tribunal in the said order: "We are, therefore, of the view that the agreement in question is not without consideration and the revenue cannot successfully argue that there being no contribution of capital, or skill, or labour, the case is without considerations". 5. It was also submitted that the ITO was not justified in treating her as Benamidar of Shri Gopal Lal simply because a gift of Rs. 10,000 was received by her from the partner Shri Gopal La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat too according to the Gift-tax assessment order from Shri Gopal Lal, one of the partners. Smt. Koshalya Bai made contradictory statement about the sources of receipt of Rs.10,000. At one point, she said that the gift was given by her father-in-law Shri Vikya Mal and at another time she said that it was given by Shri Gopal Lal the second partner. Because of the contradictory the statement made it was evident that the gift was only a make belief affair. Even the capital of Rs. 10,000 belonged to Shri Gopal Lal. It was also submitted that it was immaterial whether there was any deduction in the share of profit of Shri Gopal Lal. According to the ld. D.R. the 20% share of profit given to her by reducing the share of Vikya Mal in fact, belongs to Shri Gopal Lal because of the fact that he had gifted amount of Rs. 10,000 to Smt. Koshalya Bai to become partner. It was therefore, submitted that since the funds brought by Smt. Koshalya Bai, though brought subsequently were provided by Shri Gopal Lal, she was his Benamidar. It was also submitted that she is closely related to Shri Gopal Lal being the wife of his brother. It has also been submitted by the ld. D.R. that according to custom, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration. We would consider the issue from another angle also to find out as to whether Smt. Koshalya Bai was dummy partner and whether the partnership was sham. It is argued that capital or skill labour is not necessary for a valid partnership. Sharing of losses itself is sufficient consideration as the partner exposes himself to the liability of the firm including the risk of losses. According to the statement of the lady her husband is not a well to do man in as much as, he is working as a Salesman and the salary earned by him is not enough to make both ends meet. She further stated that she joined the firm as a partner to supplement income as the income of her husband was not sufficient to run the house. For becoming partner, her brother-in-law gave her gift of Rs. 10,000. This shows that her financial status is also not sound, so much so, she did not have any funds of her own for being invested as capital. Even the capital had to be provided to her in the form of gift by one of the partners in the firm. The financial position of her husband is not better as stated by her in the statement made before the ITO. May be that sharing of losses and other liabilities exposes her to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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