1976 (7) TMI 44 - HC - Income Tax

Summary

Issues:
Registration of a firm under section 26A of the Indian Income-tax Act, 1922 for the years 1958-59 and 1959-60.

Analysis:
The case involved the registration of a firm named New Life Construction Co. The firm was constituted with four partners, and the partnership deed specified the capital contribution, control over financial matters, and contingency provisions. The deed was signed by all partners, including partners from another firm, Jay Vishin & Co. A supplementary deed was later drawn up to clarify the partnership structure. The Income-tax Officer initially refused registration, but the Appellate Assistant Commissioner reversed the decision, emphasizing that the firm was validly constituted, as per the partnership deed. The Tribunal upheld this decision, noting that all partners were clearly identified, and their shares were specified in the deed and registration applications.

The revenue contended that if a partnership firm consisted of individual partners and a firm, it was not entitled to registration. However, it was acknowledged that all five partners, including those from Jay Vishin & Co., had signed the partnership deed. The Court emphasized that the individuals had become partners, and their shares were clearly defined, aligning with the requirements for a genuine firm eligible for registration under the Act. The Court cited a previous case to support this interpretation, where a partnership was valid despite profits being credited to the firm's accounts. The decision highlighted that the intention of a partnership between an individual and constituent members of a firm could be clear even if the deed used the firm's name and was signed by all members.

Ultimately, the Court affirmed the registration of the firm for the relevant years, based on the clear identification of partners and their specified shares. The decision was supported by precedent, and the revenue was directed to bear the costs of the assessee.