1979 (3) TMI 42 - HC - Income Tax

Summary

Issues:
Renewal of registration under s. 26A of the Indian I.T. Act, 1922 based on distribution of profits among partners.

Analysis:
The judgment pertains to a reference made under s. 66(2) of the Indian I.T. Act, 1922 regarding the renewal of registration of an assessee-firm under s. 26A. The Income Tax Officer (ITO) refused renewal as the firm did not distribute profits among partners but carried them forward in the books. The Appellate Assistant Commissioner (AAC) upheld this decision, noting the firm's failure to distribute profits as required for registration. The Appellate Tribunal also dismissed the appeal, stating no evidence was presented to show profit distribution. The Tribunal's order was challenged, arguing that crediting profits to partners' accounts sufficed for distribution. However, the court found no material proving profit distribution, as observed by the AAC. The Supreme Court precedent in Sher-e-Punjab Silk Stores v. CIT highlighted the necessity of dividing profits before applying for renewal, as per relevant rules and sections.

The court upheld the decisions of the Tribunal, AAC, and ITO, emphasizing the firm's failure to demonstrate profit distribution among partners. The court rejected the argument that crediting profits to partners' accounts was sufficient, as no evidence supported this claim. The reference was answered against the assessee, who was directed to bear the costs of the reference. The judgment underscores the importance of complying with the rules governing profit distribution for the renewal of registration under the Indian I.T. Act, 1922.