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TMI Blog1979 (5) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... d Jain (xii) Devender Kumar s/o Shanti Prasad Jain (xiii) Raj Kumar s/o Manphul Singh (xiv) Deepak Kumar s/o Ferozi Lal In addition, Dhan Raj minor son Raghbir Singh and Sunil minor son of Gulab Singh Jain were admitted to the benefits of the partnership, On 1st June, 1972 there was a change in the constitution of the firm inasmuch as Shbhash Chand, Mahesh Kumar and Kul Bhushan retired from the partnership and Satinder Kumar and Ferozi Lal were taken as new partners. However, on 13th June, 1972 Sunil Kumar attained majority and when a new partnership deed was executed on 20th July, 1972 it clarified as under "Whereas from 1st June, 1972 the following changes have occurred in the said partnership firm— (a) Subhash Chand, Mahesh Kumar s/o Sah Dev and Kul Bhushah s/o Ferozi Lal have retired from the said partnership firm. (b) Satinder Kumar s/o Shanti Parshad Jain and Ferozi Lal s/o Sher Singh have joined the partnership. (c) Sunil Kumar s/o Gulab Singh Jain has attained the age of majority and has elected to become partner in the said firm. Whereas Dhan Raj s/o Raghbir Singh and Rajiv Kumar s/o Gulab Singh Jain, minors have been admitted to the benefit of profit where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artners and they were described as such in the partnership deed. It was urged that in the case of the assessee there was no such thing and as a matter of fact it was made clear in the deed dt. 20th July, 1972 that Sunil Kumar after attaining majority had elected to become a partner, which clearly showed that the assessee wanted to project to the ITO that the said Sunil Kumar attained majority between 1st June, 1972 and 13th June, 1972. The AAC was also referred to the CBDT circular dt. 19th March, 1966 in which the ITO's were directed that non-signing of the partnership & registration deeds by the guardians of the minors admitted to the benefits of the partnership, should be considered as a mistake for which the firms should be given opportunity for rectification. In respect of the additional ground of the ITO for the second period, it was submitted before the AAC that the Supreme Court Judgment in the case of Dwarka Dass Khetan(2) was not applicable to the facts of the case an on 20th July, 1972, the date on which the partnership deed was executed Sunil Kumar had already become major and he could legally enter into a contractual relation. It was also the assessee's case that on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the partners were bound to act according to the stipulations in the deed and according to the provisions of the Indian Partnership Act, 1932. The firm in that case contended that it was sufficient if the proportion in which the losses were to be shared was otherwise ascertainable and that cl. 9 satisfied the requirement as it brought in by implication s. 13(b) of the Partnership Act. We do not understand as to how the said judgment has any application in the present case. Simple and plain facts in the present case are that Sunil Kumar who had been admitted to the benefits of the partnership on 1st Oct., 1971 attained majority on 13th June, 1972 and when a fresh partnership deed was executed incorporating the changes in the constitution as on 1st June, 1972, he elected to become a partner on his attaining majority and that is how he came to sign the deed on 20th July, 1972. Even though he attained majority on 13th June, 1972 when the change in the partnership deed had already taken place w.e.f. 1st June, 1972, it was agreed by the partners that it will have effect from 1st June, 1972 and the profits sharing ratio will be applied to the trading results of the firm for the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be granted registration for the entire assessment year, we have already reproduced the relevant clause in this order. At this stage, we like to refer to the Supreme Court judgment in the case of CIT vs. Ashokbhai Chimanbhai(5). The Hon'ble Supreme Court has laid down a very important principle that 'profits' do not accrue from day to day or even from month-to-month and have to be ascertained by a comparison of assets at two stated points. In the case of a partnership where the accounts are to be made at stated intervals the right of a partner to demand his share of the profits does not arise until the contingency which by operation of law or under a covenant of partnership deed gives rise to that right, has arisen. If we keep the said principle in view, the profits accrued to the assessee on 30th Sept., 1972 only and, therefore, the registration could not be refused on the ITO's reasons that Sunil Kumar could not be given any loss share between 1st June, 1972 to 13th June, 1972. Another aspect which comes to our mind is that it is a clear case of change in the constitution of the firm under s. 187(2) of the Act. When we observe this, we have a Full Bench judgment of the Punjab an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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