1981 (8) TMI 118 - AT - Income Tax

Summary

Issues:
1. Registration refusal for assessment years 1976-77 and 1977-78 based on changes in partnership deed and partner status.

Analysis:
The case involved two appeals by the assessee challenging the refusal of registration for the assessment years 1976-77 and 1977-78. The primary contention was regarding changes in the partnership deed and the status of partners, particularly relating to the inclusion of a minor partner who attained majority during the relevant period. The Income Tax Officer (ITO) refused registration citing various reasons, including the absence of a new partnership deed upon the minor partner's transition to a full-fledged partner and concerns about the representation of a partner in the deed. Additionally, the ITO raised issues regarding profit sharing ratios and the payment of salaries to partners not explicitly mentioned in the partnership agreement.

Upon appeal, the Appellate Assistant Commissioner (AAC) upheld the registration refusal, emphasizing the necessity of a fresh partnership deed upon the minor partner's transition to a major partner. The AAC did not delve into other grounds cited by the ITO for refusal of registration.

In the appeal before the tribunal, the assessee's counsel argued that as per the Partnership Act, no new deed was required upon the minor partner's transition to a major partner if there were no changes in profit sharing or liabilities. Reference was made to a Board's Circular supporting this argument. The counsel contended that the minor partner had indeed become a full-fledged partner, despite certain mentions in the partnership deed regarding representation by another individual.

After considering the arguments, the tribunal found that no new partnership deed was necessary upon the minor partner's transition to a major partner if there were no alterations in profit sharing or liabilities. The tribunal also clarified that the absence of a deed of dissolution mentioned in the second partnership deed did not impact the registration consideration. It was established that the minor partner had indeed become a full-fledged partner based on the partnership document, and the concerns raised by the ITO regarding representation and salary payments were deemed insufficient to deny registration. Consequently, the tribunal directed the grant of registration to the assessee firm for the relevant assessment years, 1976-77 and 1977-78.

In conclusion, the appeals were allowed, and registration was granted to the assessee firm for the specified assessment years.