1984 (9) TMI 110 - AT - Income Tax

Summary

Issues:
1. Registration of the assessee-firm under the Income Tax Act.

Detailed Analysis:
The judgment revolves around the controversy of allowing registration to the assessee-firm under the Income Tax Act. The firm was constituted with six partners, including a minor with a 12% share who did not contribute capital or services. The Income Tax Officer (ITO) found that the minor was a benamidar of his father, who worked for the firm part-time. The ITO invoked Explanation to section 185(1), which states that a firm shall not be considered genuine if any partner is a benamidar and other partners are aware of it. The ITO held that the firm did not comply with the requirements of filing a declaration under rule 24A in Form No. 12A, leading to the denial of registration.

The Commissioner of Income Tax (Appeals) [CIT(A)] did not address the non-compliance with the Explanation to section 185(1) but made general observations about other statutory formalities. The Tribunal emphasized that registration is a benefit subject to strict compliance with legal provisions. Citing precedent, the Tribunal highlighted that non-compliance with statutory provisions hinders registration benefits. The Tribunal rejected the argument of discrepancies in the partners' statements regarding the minor's benami status, emphasizing that all partners were aware of it, as per the evidence.

The Tribunal referred to Section 2(23) which defines a firm, partner, and partnership, including minors admitted to partnership benefits. Since the firm failed to comply with the statutory provision of Explanation to section 185(1), the Tribunal upheld the ITO's decision to deny registration. Consequently, the order of the CIT(A) was set aside, and the ITO's decision was restored. Ultimately, the Revenue's appeal was allowed, affirming the denial of registration to the assessee firm under the Income Tax Act.