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TMI Blog1980 (12) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... i. Narinder Kumar was given 20 per cent share which Ganpat Rai had during his life time. 3. Again on first day of April, 1968, there was a change in the constitution of the firm as per instrument of that date and by this new arrangement, the partnership was re-organised by taking the assets and liabilities of the firm at par and in order to avoid disputes, if any, arising in future, it was agreed that profit sharing ratio of the three partners will be of 1/3rd each. In this constitution also the partners are S/Shri Karam Chand, Jagan Nath and Narinder Kumar. 4. By instrument of partnership dt. 1st day of Jauary, 1976, there was further re-organisation of the partnership business due to the death of Shri Karam Chand. The date of his death is not recorded but the preamble of the deed shows that Jagan Nath s/o late Shaibditta Mal. Sumitra Devi widow of late karam Chand, Mahesh Kumar s/o Karam Chand, Harish Chnder s/o Jagan Nath, Shati Devi widow of Ganpat Rai and Narinder Kumar s/o Ganpat Rai respectively being of I, II, III, IV, Vand VI part, have agreed to re-organise the partnership firm and to reduce into writing the terms and conditions of the partnership deed afresh while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. In other words these three groups allocated amongst themselves 33 per cent share each and out of a rupee, one new paise was allocated to charity. 6. When the ITO took up the assessment he recorded the statement of Smt. Sumitra Devi as well as Smt. Shanti Devi IT Act, was recorded on 5th Jan., 78 and that of Sumitra Devi on 20th Jan., 78. According to the ITO Smt. Shanti Devi admitted that she did not work on the shop, had not brought in capital and had no power of operation of bank account. As such according to him, she was a dummy in the business. Smt. Sumitra Devi, according to him, had no knowledge of the capital of her husband, had no power of operating bank account, no knowledge of her share and as such all this reflected that though the capital of her husband had been transferred to her account, she was otherwise a dummy partner. The ITO also pointed out that by giving 1 per cent share to charity, charity had been made a partner of the firm and it could not be granted registration. The registration was, therefore refused by an order under s. 185(1)(bb) of the Act. 7. During the course of hearing before the AAC, in order to support the claim that Shanti Devi was actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dinary course and the latter statement should be discarded. Her second statement also is vague. She did not even show that she represented Narinder Kumar and as such she was a genuine partner. 11. The revenue further contended that cls. 9 and 10 of the partnership deed clearly indicate that the charity has been made a partner and this is supported by the fact that the partners who filed applications in the prescribed forms 11 and 11A, indicated in the description of the partners charity as one of them. The revenue fairly conceded that in the preamble of the deed there are only six partners but emphasised that in fact charity was made a partner in view of what is stated above. A point was made out that the deed does not show how the fund in the charity would be dealt with the three was no legal binding on the partners to disburse it for charitable purposes. 12. The ld. counsel for the assessee, on the other hand, submitted that the mention of charity in cl. 9 is only to indicate that the partners agreed inter se to allocate 1 per cent of the profit for purpose of charity. It was submitted that if the two clauses are read closely, it would become evident that charity is not mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o hold her as not a genuine partner. We, therefore proceed to examine whether the firm could be refused registration on account of considering Smt. Shanti Devi as not a genuine partner of charity having been taken as a partner in the firm. 15. So far as Shanti Devi is concerned, her first statement recorded by the ITO has not been placed on our file by either side. It is to be noted that it is the appeal of the Revenue but in the paper book of the Revenue there are only two papers i.e., From Nos. 11 and 11A and statement of Shanti Devi is not filed. In the paper book of the assessee, the statement of Shanti Devi was recorded on 11th Aug., 1978 appears at pages 9 and 10. The ITO in his impugned order has recorded that when the statement of Smt. Shanti Devi was recorded on 5th Jan., 1978, she showed ignorance about the business activities of the firm such as, the date of closure of the books of account and she admitted that she did not work on the shop. Since this was not accepted by the parties and the statement recorded by the ITO on 5th Jan., 78 was not taken as conclusive by the AAC, he called for a remand report. In the remand proceedings, in the statement recorded on 11th Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e partners. 17. In the case of M/s Bhagwanchand s. Jain Company, the assessee was granted registration for the asst. yr. 1966-67 and it came to be renewed year after year. The CIT being of the opinion that the grant of registration was erroneous and it was prejudicial to the interest the Revenue, issued notice under s. 263 of the IT Act because of the view taken by him that the charity had been included as a partner and this was illegal and, therefore registration ought not to have been granted. The relevant portion of the partnership deed in that case was as under: "The profits of the business shall be reckoned at Re. 1.00 and the partners shall share the same as under: Bhagwanchand Kummatmul 0.25 ps. Parsmal Himmatmul 0.25 ps. Seremul Osttaji 0.30 ps. Mohan Lal Seremul 0.15 ps. Charity 0.5 ps. Total Re. 1.00 Losses if any will be shared in the same ratio." When the matter came before the Tribunal it was of the view that the charity as such was not a partner but it came to a conclusion that in the event of loss, it was not at all clear as to how it should be distributed and accor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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