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TMI Blog1973 (8) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows: " 7. The profits of the partnership business shall be shared and borne by the partners as under. Any loss sustained by partnership business, such losses are not binding on the 3rd partner. Partner No. 1 P. Kunhayin. 40% Partner No. 2 K. Abdurahiman. 35% Partner No. 3 M. Avaran Koya. 25% .............................. 15. In matters wherein no specific mention is made hereunder, the provisions of the Indian Partnership Act, 1932, shall prevail with respect to the relationship between the partners and the firm and third parties. " Chapter III of the Indian Partnership Act, 1932 (for short " the Act ") deals with "relations of partners to one another " and Chapter IV thereof deals with " relations of partners to third parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip, the shares are clearly defined, though they are not worked out in precise fractions. " Applying the principle enunciated in this decision, the Supreme Court construed the provisions in a partnership deed in the decision in Parekh Wadilal Jivanbhai v. Commissioner of Income-tax. The following extract from the judgment would be useful: "On behalf of the assessee the argument was put forward that the High Court was in error in holding that the assessee was not entitled to registration under section 26A of the Act. It was submitted that on a proper construction of the various clauses of the partnership deed dated March 19, 1950, it should have been held that the shares of the three individual persons in the profits and losses were clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares in the instrument of partnership is a necessary requirement for registration. Now turning to another decision of the Supreme Court it is clear that if there is no such provision registration would not be granted. The decision is in N. T. Patel & Co. v. Commissioner of Income-tax. The following extract from the judgment therein may be read: "But in none of these clauses it is stated what the shares of the partners in the profits and losses of the firm were to be and that in our opinion was requisite for registration of the partnership under section 26A of the Act and as that was wanting, registration was rightly refused. " This court had occasion to consider whether in the absence of provision in the partnership deed regarding the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit was not liable for the loss. This clarification deed did not provide in what manner the 25 per cent. loss which would have been borne by the minor as provided by the partnership deed of 1st December, 1960 (assuming the provision is valid in law which it does not appear to be) would be divided among the other two partners. In the absence of such provision it was ruled that the clarification deed did not satisfy the requirements of section 184 of the Income-tax Act, 1961, and it was held that the firm was not entitled to registration. Applying the principle of these decisions, the assessee-firm is not entitled to registration. Counsel for the assessee invited our attention to section 48 of the Act and contended that clause 15 of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficulties in accepting this argument. The reference in clause 15 of the partnership deed, qualified as it is by the wording of that clause, cannot attract section 48. Secondly, section 48 will apply only when the question of hearing losses on dissolution of the firm arises and will not apply as such to cases of sharing losses while the firm is continuing to carry on its business. No doubt, the principles of section 48 have been applied by courts in determining in the absence of a contract or when section 13 would not as such apply to determine the manner in which the losses should be borne. The decision in K. Pitchiah Chettiar v. G. Subramanian Chettiar is one such case. The principles that are embodied in the section itself were evolved by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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