TMI Blog1989 (7) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... Girish Kumar and Shri Vipin Goel as partners. Shri Barun Kumar Adarsh was, however, admitted to the benefits of the partnership. The profits and losses were to be divided as under:--- Sl. Name of the partner Profits Losses No. 1. Smt. Prem Goel 17 1/2% 25% 2. Smt. Girish Kumar 35% 50% 3. Shri Vipin Goel 17 1/2% 25% 4. Shri Barun Kumar (minor) 30% 3. Shri Baran Kumar attained majority on26-7-79. No fresh partnership deed was executed. The ITO treated the firm as registered firm without any discussion. While scrutinizing the assessment records, the CIT found that the assessee firm had been wrongly given the status of a registered firm. He, accordingly, issued a show-cause notice and after giving an opportunity of hearing to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been placed by the learned counsel for the assessee, stands reproduced at page 3503 of the Income-tax Law (3rd Edition), Volume IV by Chaturvedi and Pithisaria. The said Circular was issued by the Board after the Allahabad High Court gave its decision in the case of Ganesh Lal Laxmi Narain v. CIT [1968] 68 ITR 696. In that case, the minor who was previously admitted to the benefits of the partnership, attained majority and no new deed of partnership was executed. The Allahabad High Court was of the view that since sec. 26A of the Indian Income-tax Act, 1922 provided for the registration only of a firm constituted under an instrument of partnership specifying the individual shares of the partners, refusal to renew registration of a firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p Act, however, prescribes that, in case such a minor fails to give a notice that he has elected to become or he has elected not to become a partner in the firm, then he shall become a partner in the firm on the expiry of the said 6 months period. As mentioned above, 6 months period expired on25-1-80and the assessee firm closed its books of account for the assessment year 1981-82 on30-9-80. In that view of the matter, the minor became a partner on the expiry of 6 months period. But, as held by the Full Bench of the Allahabad High Court, in Badri Narain Kashi Prasad's case, there can be no change in the constitution of the firm by the mere fact of a minor admitted to the benefits of partnership, becoming a major and electing to remain a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to apply in this case, the assessee would not be entitled to continuation of registration for the assessment year 1981-82. The scope of the circular is limited and the circular only says that registration need not be denied simply because the minor hitherto admitted to the benefits of the partnership becomes a full-fledged partner on attaining majority and no new partnership deed has been drawn up to give effect to that change. That, however, does not contemplate a situation where the minor's share of loss is unascertainable. This hurdle has to be crossed, which has not been crossed in the instant case. In that view of the matter, the CIT was right in saying that the ITO had wrongly allowed the continuation of registration to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . [1982] 133 ITR 736 (Gauhati) (vii) CIT v. Sakseria Cotton Mills Ltd. [1980] 124 ITR 570 (Bom.) (viii) Karsandas Bhagwandas Patel v. G. V. Shah ITO [1975] 98 ITR 255 (Guj.) (ix) Poonjabhai Vanmalidas v. WTO [1978] 114 ITR 38 (Guj.) (x) CIT v. R.S. Banwarilal [1982] 28 CTR (MP) 59 (FB) 8. In view of the Allahabad High Court decision, in Badri Narain Kashi Prasad's case, continuation of registration in the instant case would have been illegal because there was no stipulation regarding the share of losses amongst the partners including Shri Barun Kumar who attained majority during the year under consideration. On that basis, the ITO should have passed a separate order under sec. 185(1)(b), which was separately appealable under sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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