TMI Blog1987 (5) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... though rule 46A had been overlooked by the CIT (Appeals) it is not so serious enough as the main issue of the granting of registration to the firm. 2.1 Referring to the partnership deed, he submitted that there were three partners, namely, Dr. S. Batra, Shri D.N. Batra and Shri R.K. Dhingra in the firm. They share the profits in the ratio of 60%, 20% and 20% respectively but the losses are to be shared between Dr. S. Batra and Shri R.K. Dhingra at 80% and 20% respectively. According to Mr. Bajpai section 6 is emphatic about the fact that mere sharing of profit alone does not make a person partner in a firm. According to him since Shri D.N. Batra who is the father of Dr. S. Batra is to share only the profits and not in the losses, keeping ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred any second appeal before the Tribunal. According to him provisions as are contained in section 6 are only for examination of the true relationship between persons and such examination was done in several cases with relevance to sec. 13 of the Partnership Act and it is the view of the Courts that to be a partner it is not necessary that a person must share in the losses. He referred to Law of Partnership by Singh and Gupta page 105 and also to ITO v. Gagrat Co. [1982] 2 ITD 284 (Delhi.), B.C.G.A (Punjab) Ltd. v. CIT [1937] 5 ITR 279 (Lahore), CIT v. Rama Transport Co. [1982] 137 ITR 11 (Cal.), N.S.S. Sokkalingam Chettiar Co. v. CIT [1966] 60 ITR 671 (Mad.), Sewa Ram Aggrawal Co. v. ITO [1978] Tax 51 (6)-77 (Chd.), ITO v. Aarkey C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any capital and also not to contribute for the losses of the firm but only to share in the profit can he be called a partner in the firm and whether the agreement could be said to be an agreement of partnership. 5. According to section 4 of the Indian Partnership Act, 1932, partnership is the relation between persons who have agreed to share the profits of the business carried on by all or any of them acting for all. In the instant case Dr. S. Batra is a non-resident and also son of Shri D.N. Batra and even while staying abroad he had been providing for all the contracts necessary for the business of the firm established in India with a view to earn the agency commission. For this purpose the two of the partners inIndiahave to necessarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption. Courts would not weigh the fact of sharing of profits in isolation. It has to be taken together with other circumstances. " In page 38 of the same book the learned author further observes "It is not essential to constitute a partnership that the partners should agree to share the losses. The element of sharing losses may be regarded as consequential upon the sharing of profits, as a firm may be created in which losses are not contemplated or provided for by the sanguine partners. Every man who has the share of profits for a trade, ought also to bear his share of the loss in that proportion in the absence of a contract to the contrary. The Act, therefore, does not seek to make agreement to share losses a test of the existence of par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rne by them. They can even stipulate that the liability of one partner to share the losses is to be limited or even entirely excluded. The Supreme Court in the case of Mandyala Govindu Co. was confronted with the issue of a partnership deed in which minor was admitted to the benefit of partnership and the deed being silent as to the ratio in which the losses were shared between the major partners. Their Lordships of the Supreme Court reproduced the observation of the Madras High Court in the case of Pitchiah Chettiar, observed thus :-- "The other rule that where the shares in the profits are unequal, the losses must be shared in the same proportion as the profits if there is no agreement as to how the losses are to be apportioned, does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions as contained in section 13(b) is indicative of the fact that even in the case of unequal shares between the partners the ratio of sharing of profits and contributions to the profits have to be in the same proportion, appeals to the general common law but even under that Act the rulings have been that the Act never intended it so. It is, therefore, our considered opinion that the present deed dated4-1-74is a valid partnership agreement and registration has to be allowed and we accordingly uphold the action of the CIT(A) in this connection. 6.2 The other issue regarding admission of additional evidences in the shape of RBI's permission allowing Dr. S. Batra as a non-resident partner is only in the nature of clarification and nothing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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