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TMI Blog1982 (5) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... Smt. Ratni Devi were taken as new partners both of them having 40% and 25% shares respectively. Anil Kumar is son of Bansi Dhar and Smt. Ratni Devi is wife of Paryag Chand, brother of Sri Kishan, partner. To start with, Smt. Ratni Devi had an opening balance of Rs. 5,100 and subsequently deposited another sum of Rs. 5,000 which she got in gift from Sri Kishan, partner. Even the earlier amount of Rs. 5,100 as opening balance in her account was out of gift received by her from Sri Kishan. When in the partnership, Smt. Ratni Devi became a new partner the ITO observed that Sri Kishan was partner having 50% share and when Smt. Ratni Devi became a partner, he reduced his share by 25%. Smt. Ratni Devi was examined and her statement recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fact, both the new partners Smt. Ratni Devi and Anil Kumar in their affidavits have admitted the fact of their being partners of the firm., The lady had an opening balance of Rs. 5,100 and had further invested an amount of Rs. 5,000. It may be mentioned here that the mere fact that some partner does not bring in any capital or that the sleeping partner is ignorant about the details of the partnership or does not contribute skill, does not mean that the partnership is spurious. The ITO has not brought any material on record to show that the terms laid down in the instrument of partnership were not intended to be executed and that the instrument was a pretence to escape the liability to taxation. Sec. 4 of the Partnership Act defines 'partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributed capital were not allotted shares according to their contribution. On appeal, the AAC confirmed the ITO's order. The Tribunal held that the mere ground that some of the partners did not contribute any capital would not be a valid ground for holding that the firm was not genuine. Capital contribution and the allotment of shares was a matter to be decided by the partners themselves and registration could not be refused on this ground only. It was held that if a partnership actually existed in terms specified in the deed, the incidence of taxation was irrelevant and would not justify refusal to register the firm. On the facts and in the circumstances of the case, the ITO was not justified in refusing to register the firm. He is directed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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