TMI Blog1991 (11) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be shared by the partners as follows :-- 1. Party of the First Part 10 paise in a rupee 2. Party of the Second Part 8 paise in a rupee 3. Party of the Third Part 8 paise in a rupee 4. Party of the Fourth Part 8 paise in a rupee 5. Party of the Fifth Part 10 paise in a rupee 6. Master M. Sudershan, Minor 10 paise in a rupee 7. Master M. Srinivas, Minor 8 paise in a rupee 8. Master M. Ramesh, Minor 8 paise in a rupee 9. Miss L. Vijayalakshmi, Minor 10 paise in a rupee 10. Miss L. Shailaja, Minor 10 paise in a rupee 11. Master L. Suman, Minor 10 paise in a rupee ----------------------------------- 1-00 (one rupee) ------------------------------------ The losses of the firm shall be borne by the parties as follows :-- 1. Party of the First Part 25 paise in a rupee 2. Party of the Second Part 18 paise in a rupee 3. Party of the Third Part 16 paise in a rupee 4. Party of the Fourth Part 16 paise in a rupee 5. Party of the Fifth Part 25 paise in a rupee ----------------------------------- 1-00 (one rupee) ----------------------------------- The assessee-firm carried on business in finance and also runs a chit fund company under the nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x(Appeals) II, Hyderabad. It was contended before her that refusal to grant continuation of registration was quite unwarranted. Execution of a new partnershipdeed was not required when the minor who was admitted to the benefits of the partnership attains majority, the assessee-firm had only profit from assessment year 1983-84 and therefore the finding of the ITO that the partnership deed dated 18-10-1979 did not contain the loss sharing ratio was irrelevant. The learned CIT(A) had accepted the contention of the assessee as correct and ordered continuation of registration to the firm, listing out the following reasons : 1. The appellant had filed Form No. 12. 2. The ITO has accepted that the execution of a new partnership deed was not required. 3. Even though the original partnership deed dated 18-10-1979 did not include loss sharing ratio of its partners, when minor M. Sudershan attained majority, that is irrelevant, as the appellant had only income in 1982-83 and 1983-84 assessment years. She directed the ITO to grant continuation of registration to the assessee-firm under section 184(7) by her impugned orders dated 27-1-1989. 3. Having been aggrieved against those order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken to have agreed to bear the losses of the firm, if any, incurred for assessment year 1982-83. Further, it was submitted that in assessment year 1982-83, the assessee-firm did not sustain any loss whatsoever and in fact it had declared an income of Rs. 1,37,017 as per its return dated 12-8-1985. When there is no change either in the profit or loss sharing ratio among the partners, there was no need for any fresh deed at all. The learned counsel for the assessee relied upon the ratio of the Bombay High Court decision in Dattatraya Gopal Shette v. CIT [1984] 150 ITR 460 and the Full Bench decision of the Kerala High Court in CIT v. Phair Laboratories [1985] 154 ITR 141. Shri Parthasarathy brought to my notice the following legal proposition found at page 3502 of Chaturvedi and Pithisaria Income-tax 3rd Edition, 4th Volume under the authority cited thereunder. The ratio is as follows : " Where a minor who had been admitted to the benefit of a partnership attained majority within six months before the end of the relevant previous year of the firm there is involved no change in the constitution of the firm because during the option period of six months as given under section 30(5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm No. 12 is to be signed by all the major partners of a firm, when once it is mentioned therein that there is no change in the profit and loss sharing ratio of the partners of the firm, there is no reason why the said declaration should not be taken to be true and we do not see any tenable objection for the said recital being taken as having been the settled term among the partners. Therefore, for the purposes of continuation of registration, we take it, as having been settled, between the partners, that the five original major partners only agreed to bear the losses, whereas, the profit sharing ratio among the major and minor partners remained unchanged. Thus, when neither the profit sharing ratio nor loss sharing ratio was altered or agreed to be altered among the partners, was there any necessity for entering into a fresh deed of partnership simply because one of the minor partners becomes major. A similar situation seemed to have been considered by the Full Bench of the Kerala High Court in Phair Laboratories' case. In that case the partnership deed was drawn up in December 1963. At that time one of the parties 'C' was a minor. For assessment years 1965-66 and 1966-67, the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right in proceeding on the premise that the profit and loss sharing ratio under the partnership deed dated 18-10-1979 remains as it is, even for assessment year 1982-83. Therefore, when they remain unchanged there is no need for any fresh partnership deed to be executed before continuation of registration can be granted. In this connection our attention is drawn by Shri Parthasarathy, learned counsel for the assessee to the following CBDT Circulars : " 1. F.No. 26/35/61-IT(A-I), dated 3-1-1962 from CBP which is as follows : Please refer to CIT, Lucknow's letter No. Rev. C.No. 15-33B/61-62/DDUN dated the September 1961, on the above subject, to the Board for deciding that where there is no doubt about the genuineness of the partnership, registration need not be denied simply because the minor hitherto admitted to the benefits of partnership become a full-fledged partner on attaining majority. 2. F.No. 76/1/67-IT(All.), dated 20-3-1969, which is as follows : Reference is invited in Board's Circular No. 26/35/61-IT(AI) dated 3-1-1962 to the effect that where there is no doubt about the genuineness of the partnership, registration need not be refused simply because a minor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership is necessary, if only he is entitled to any agreed proportion of profits. Here in this case, we have already held on the construction of Form No. 12, that the minor in this case from the facts and circumstances, did not undertake to bear any losses. So also the major partners did not fasten any part of the liability on the minor to share in losses. The profit sharing ratio of Shri Sudershan remained the same both when he was a minor, as well as, when he became a major. In such circumstances, as per the above said Board Circular we hold that no fresh partnership deed is necessary. On somewhat similar facts which are obtaining in this case, this Tribunal had already decided the matter in favour of the assessee in Veerraju Co. v. ITO [1981] 5 Taxman 17 (Hyd.). In that case it was held that it is entirely up to the partners to decide that any or some of them will not have the share of losses and that any sort of agreement in that regard would not offend any provision of the Indian Partnership Act, 1932. In that case also, the Tribunal had followed the Board Circular dated 4-4-1978 cited supra and held that no fresh partnership deed is necessary. In that case, there were f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... major during the accounting year. The minor was admitted to the benefits of the partnership firm. After attaining majority she did not make any declaration about to terminate her connection with firm. No new partnership deed was executed by the firm. The ITO refused continuation of registration to the firm on various grounds including the ground that the profit sharing ratio of the partners had undergone a change when minor became a full-fledged partner on attaining majority and a new partnership deed ought to have been executed. The Tribunal observed that under section 30(7)(b) of the Partnership Act, 1932, the share of a minor who become major and elects to continue as partner of the firm has the same share in profits of the firm to which he was entitled as a minor. Tribunal, therefore, laid down that execution of a new partnership was not obligatory on attaining majority by the minor when no alteration in the share of profits was intended. The Tribunal held that registration could not be refused to the firm on this ground. Tribunal also observed that there was a circular of the Board dated 4-4-1978, according to which it was not necessary to have a fresh instrument of partnersh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 1982-83, since the same holds good even for this assessment year, we set aside the orders of the CIT(A) and direct the ITO to grant continuation of registration. Appeal for this assessment year therefore stands dismissed. 6. As regards assessment year 1984-85, the accounting year of the assessee-firm ended by 31-3-1984. It is the case of the assessee that it had sent Form No. 12 duly filled up and signed by all the partners to the ITO's Office on 31-7-1984. In support of the said allegation, the assessee had a Certificate of Posting hearing postal stamp dated 31-7-1984 with it. The ITO while refusing continuation of registration for assessment year 1984-85 held that the primary onus lies upon the assessee to prove that the assessee submitted Form No. 12 in the ITO's office on 31-7-1984. He held that Certificate of Posting would only reveal that a cover was sent to the ITO but does not establish positively that Form No. 12 for assessment year 1984-85 was filed before the ITO. Further, for assessment year 1984-85, the assessee is expected to file Form No. 12 within the close of the accounting year, viz., 31-3-1984 and in the absence for any request for condonation of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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