TMI Blog1978 (2) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 per cent (6) Smt. Jatu Bai, wife of Shri Mool Chand 25 per cent On 24th March, 1971 a change took place in the constitution of the firm inasmuch as the first mentioned three partners retired on that date and the remaining partners continued to carry on the business admitting to benefits of partnership Shri Navratan Mal, another son of Shri Mool Chand with 10 per cent share in profits. The first assessment of the firm was for the year 1970-71 for which the previous year ended on 31st Oct., 1969. While considering the assessee's claim for registration, the ITO held that Smt. Jatu Bai was a benamidar for her son, Shri Vimal Chand, but in view of the decision of their Lordships of the Supreme Court of India in CIT vs. Abdul Rahim(1), he granted registration to the firm as he had no doubt about the genuineness of the firm. For asst. yr. 1971-72 the assessee had filed application in Form No. 12 for renewal of registration. However, as the Explanation to s. 185(1) inserted by Act of 1970 w.e.f. 1st April, 1971 provided that a firm shall not be regarded as a genuine firm if any partner of the firm was, in relation to the whole or any part of his share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital of Smt. Jatu Bai and she did not invest anything else. But in the year under consideration the copy of account of Smt. Jatu Bai reveals that she had opening balance of Rs. 12,345. She made a further investment of Rs. 10,000 by making withdrawals from M/s. Dhanrupji Devaji Co. Bombay. She further withdrew a sum of Rs. 9,256 from M/s. Heera Lal Motilal of Bombay. These new investments or contributions of capital take away the allegation for the year 1970-71 also find that for the year under consideration the investment of Smt. Jatu Bai was much more than Shri Vimalchand, who is alleged to be a person who brought in Smt. Jatu bai as a benamidar. At the end of the accounting period Shri Vimal Chand had a closing balance of Rs. 18,058 while Smt. Jatu bai had a capital of Rs. 2,705. Therefore as a financing partner Smt. Jatu Bai is emerged. If this state of affairs is considered in the context of the statement of Smt Jatu Bai recorded by the ITO on 23rd Jan., 1974, it will be revealed that she is not a benamidar of Shri Vimalchand. In answer to question No. 2, she described the nature of the business of the appellant firm. Then she went on to mention the names of the partners an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai had invested about Rs. 20,000 or so in the firm in the relevant previous year, had stated clearly that she used to sign the cheques off an on, that the profits or loss was duly credited to her account and that there was no material to show that she did not have control over the same or hat it was diverted to Shri Vimal Chand. The learned Counsel for the assessee concluded by referring to Supreme Court decision in the case of K.D. Kamath Co. vs. CIT, Mysore(2), Agarwal Co. vs. CIT(3), and said that the assessee firm had fulfilled all the requirements under the law of a genuine firm and had also complied with all the formalities for the grant of registration and, therefore, the learned AAC was right in directing the ITO to allow registration to the assessee. 5. We have considered the facts and the rival submissions. We have, on the one hand, ample material to show that the firm is genuine and that Smt. Jatu Bai is a partner therein her own right and that consents of partnership deed dt. 7th Jan., 1969, affidavits of the partners, apportionment of the profit amongst the partners in profit sharing ratio, registration of the firm with the Registrar of firms and several other Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the loan of Rs. 50,000 was taken by Smt. Jatu Bai from the firm with the consent of all the partners of the firm and that this amount was advanced to her by the firm and not by Shri Mool Chand or by Shri Vimal Chand. The ITO, however, refused registration without considering the assessee's reply and without taking into account the affidavits of S/Shri Mool Chand and Vimal Chand on the ground that Smt. Jatu Bai was a benamidar for Shri Vimal Chand. He also mentioned another reason for refusing registration and that was the admission of Shri Navratan Mal to the benefits of partnership stating that he had contributed neither any capital nor skill and, therefore, he was not a genuine partner. 7. The assessee appealed to the AAC and the learned AAC cancelled the order of the ITO with the following observations: 24. I have considered the arguments advanced by the learned Counsel for the appellant. I have already held in my appellate order for the year 1971-72 that Smt. Jatu Bai is not a benamidar of Shri Vimalchand. I have also discussed the fact of capital contribution of Smt. Jatu Bai and the facts stated by her before the I.T.O. in the statement. In addition to this Smt. Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the credit balance in her account was Rs. 51,936. The learned ITO has taken the view that the amount of Rs. 50,000 was not actually borrowed by Smt. Jatu Bai from the said Bombay Firm, but in view of the affidavits of Shri Mool Chand and Vimal Chand which have remained unchallenged and in the absence of any material to support the Department's view, we are unable to agree with the Revenue in this regard. It does appear that Smt. Jatu Bai had a running account with the Bombay Firm. As already stated, in the previous year relevant for asst. yr. 1971-72 she withdrew from her account with the firm Rs. 10,000 on 2nd Sept.,1970 and Rs. 9,256 on 10th Oct.,1970 for introducing these in the assessee firm. In such circumstances, the fact that she took a loan from the Bombay firm could not be questioned without placing on record cogent material to show that the loan was in fact taken by some one else. Regarding admission of Shri Navratan Mal to the benefits of partnership, the reasons given by the ITO for not treating him as a genuine partner are not acceptable to us. It is not a necessary requirement of the law that the minor must contribute to the firm to the firm either by way of capita ..... X X X X Extracts X X X X X X X X Extracts X X X X
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