TMI Blog1969 (4) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... h inadvertence the counsel could not appear on that date he should be given an opportunity to make his submissions. We gave him such opportunity and this judgment is being delivered in supersession of the judgment we delivered on the 4th February, 1969. This was a reference under section 66(2) of the Indian Income-tax Act for the determination of the following question : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the registration under section 26A of the Indian Income-tax Act could not be granted to the firm ? " The application for registration of the firm under section 26A of the Indian Income-tax Act was refused by the Income-tax Officer. On appeal, the Appellate Assistant Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the names of the partners were not in their profit sharing ratio and during the accounting period in 1960-61, no account was earmarked as capital, and interest was charged on the entire balance standing to the credit of the respective partners and that no interest was charged during the accounting period for 1959-60. Registration was refused by the income-tax authorities on the ground that the terms of the instrument had not been given effect to by the partners. It was contended by the learned counsel for the assessee before the Tribunal that inasmuch as the income-tax authorities had not doubted the genuineness of the firm the fact that there was a slight variation in the proportion of the capital introduced by the partners from their prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous year, that is to say, the relevant accounting year, should have been divided or credited, as the case may be, in accordance with the terms of the instrument ; and, lastly, (5) That the partnership must have been genuine, and must, actually have existed in conformity with the terms and conditions of the instrument. " At page 204 the Supreme Court observed : " As a result of the above discussion, the conclusion is reasonably clear that unless the partnership business was carried on in accordance with the terms of an instrument of partnership which was operative during the accounting year, it cannot be registered in respect of the following assessment year. " With these principles in the background we have to examine the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners cannot be made from the deed itself. The learned editors of Lindley on Partnership, eleventh edition, at page 504, state : " The proportions in which the capital is to be contributed by the partners and the proportion in which they are to be entitled to it when contributed, ought also to be carefully expressed. " Learned counsel for the assessee drew our attention to the decision of the Patna High Court in the case of Sahabuddin Mohammad Raza (Siwan) v. Commissioner of Income-tax . In that case there was no separate capital account of the partners and share capital was contributed by some of the partners originally. It was held that that was no ground for refusing registration of the firm. In our opinion, that case does not help th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed of by the assessee in the instant case. We may, however, observe that before the Bombay High Court, it appears, the decision of the Supreme Court in the case of R. C. Mitter Sons v. Commissioner of Income-tax, especially the observation of the Supreme Court at page 204 of the judgment, as mentioned hereinbefore, was not cited. Reliance was also placed by the learned counsel for the assessee on the decision of the Madhya Pradesh High Court in the case of Commissioner of Income-tax v. Madanlal Chhaganlal. There the court held that the firm was entitled to registration under section 26A of the Indian Income-tax Act, 1922, on the basis of their application, notwithstanding that subsequent to the date of application, in making a division of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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