TMI Blog1970 (3) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee-firm as constituted under an instrument of partnership dated 23rd February, 1959, was made in respect of the assessment year 1961-62. It appears that, due to certain defects in the aforesaid deed, the firm's previous applications for registration in the earlier years had been rejected. This according to the assessee, led to the execution of a deed of rectification on March 4, 1962. In both the deeds the partnership is stated to have commenced with effect from 1st of Baishakh 1365 B.S. The Income-tax Officer rejected the present application by his order dated March, 28, 1963. The order was affirmed on appeal by the Appellate Assistant Commissioner by his order dated December 21, 1963. On further appeal by the assessee to the Tribunal, the application met with the same fate and the order of the Appellate Assistant Commissioner was sustained. The facts that were relied on by the assessee before the Tribunal were that Nishikanta Sen, who, was an employee of Ganesh Das Sree Ram Das of Fenchuganj in the district of Sylhet, started a retail grocery shop at Karimganj with his eldest son, Madhusudan, in 1342, B. S. Nishikanta's second son, Jadunath, joined the business in 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that whereas the partners considered it necessary to execute another deed of partnership to clarify the position without affecting the terms and conditions embodied in the deed of partnership dated February 23, 1959, this partnership deed was being executed. This deed is marked as annexure " D ". The deed was described as a deed of partnership. Clause 5 of the deed provided that the capital of the partnership would be Rs. 1,56,895.60 which belonged to the partners equally. The above are the facts and circumstances which appear from the statement of the case. The Tribunal held that it was obvious from the comparison of the two clauses providing for the capital of the partnership that it was not a mere deed of rectification. It noticed that the capital of the partnership was declared in the earlier deed to be Rs. 1,20,000 belonging equally to the partners while in the later the same was declared to be Rs. 1,56,895.60, which sum could be the capital of the business only on March 4, 1962, when the second deed was executed. The Tribunal has also taken note of the fact, which is admitted by both sides, that registration had been granted to the assessee for the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the mis-description noticed in the recitals regarding the fact of the partnership being created out of a coparcenary business. According to him, the word " coparcenary " in this context may not be taken as a term of art as understood in the Hindu law and for this mis-description alone the application, otherwise in form and in accordance with the prescribed rules, should not have been rejected. In this connection, the learned counsel refers to the decision of the Allahabad High Court in Kanodia Brothers v. Commissioner of Income-tax. He submits on the authority of this decision that mere addition of a partner which fact is held to be fictitious could not authorise refusal of registration of a firm under the Income-tax Act. The facts of this case were entirely different. There the assessee was already a registered firm, and, subsequently, a fresh partnership deed was executed under which the partners continued to be the same with the same shares, but it was stated that another person had been added as a working partner in a business which until that date was a branch of the assessee. The assessee applied for renewal of registration which was refused by the Income-tax Officer on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners or that no share capital was contributed by some of the partners originally is not a ground for refusing registration of a firm." Their Lordships in this case have further held that there was no material before the income-tax authorities to support their conclusion that the partnership constituted under the deed of partnership dated 21st March, 1953, was not a valid partnership and on that basis it was held that there was a genuine partnership firm under the deed dated 21st March, 1953, and hence, the firm should have been granted registration under section 26A. In this case there was nothing to show that the instrument of partnership was not acted upon by the partners. Mr. Choudhury also relied upon Haja Allauddin Maracair v. Commissioner of Income-tax, which is a decision from the Madras High Court. But the following observation in this decision will clearly show that this authority is of no assistance : " The cumulative effect of all the circumstances should be considered in arriving at the conclusion whether the partnership was real or not. A perusal of the provisions of the deed did not throw any doubt on the fact that the partnership was real and it must, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half of a firm and application is made for registration of a firm as constituted under such instrument, a question may arise whether the instrument is intended by the parties to have real effect as governing their rights and liabilities inter se in relation to the business or whether it has been executed by way of pretence in order to escape liability for tax and without intention that its provisions should in truth have effect as defining the rights of the parties as between themselves. To decide that an instrument is in this sense not genuine is to come to a finding of fact : whether there was evidence upon which it was open to the income-tax authority to come to such a decision is a question of law. " Mr. Bhattacharjee relied upon this decision to show that the materials. which have been noticed by the income-tax authorities in rejecting registration cannot be said to be non-existent in the eye of law and registration was therefore, rightly refused. Finally, Mr. Choudhury again drew our attention to Commissioner of Income-tax v. Sivakasi Match Exporting Co. and emphasised on the following passage in the majority judgment: " ... if the order refusing registration goes beyon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereas the two instruments give identical date of the commencement of the partnership on 1st of Baisakh 1365 B.S., they are completely divergent in showing the capital of the partnership. The partnership having been said to commence on 1st Baisakh of 1365 B.S. could not have shown completely different capital as shown in the two instruments if they relate to the same partnership. The circumstance is a relevant circumstance in order to appreciate whether the paper transaction disclosed in the 1959 document has in truth and reality any relation to actual facts. One can understand that there might be some mis-description of the partners being described as coparceners which by itself may not have been of very serious consequence, but, in view of the origin, nature and conflict of capital disclosure of the firm, even that circumstance may have some relevance in the particular circumstances of the case. We, therefore, cannot hold that the circumstances which are relied upon by the Tribunal are absolutely extraneous to the point at issue. If there were a genuine partnership created as envisaged in the instrument of 1959 on which alone the application for registration was based, it should ..... X X X X Extracts X X X X X X X X Extracts X X X X
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