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TMI Blog1973 (8) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... rtnership was registered till the assessment year 1961-62. For the assessment year 1962-63, under a confusion which was common, the assessee filed an application for renewal of registration in Form No. I.T. I-A. This was an application for renewal of registration under the Income-tax Act, 1922 (hereafter referred to as " the 1922 Act "). This application was filed on April 16, 1962. Eventually, the assessee filed an application in the correct form on December 17, 1962, which was described as Form No. 12 under the Rules which came into force after coming into force of the 1961 Act. This was a declaration under section 184(7) of that Act. The Income-tax Officer accepted the declaration and completed the assessment on March 15, 1963. In his order he recorded that the partners had filed a declaration under section 184(7) on December 18, 1962, and since there was no change in the constitution of the firm, registration of the firm was granted for the assessment year 1962-63. Allocation of the profits assessed was made accordingly equally among the four partners. Later on, the departmental authorities noticed that the partnership dated May 31, 1956, was for a fixed term of five years. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanges in the terms, and, therefore, the new deed must be construed as a fresh deed of partnership. The Commissioner of income-tax had referred to the case of National Motor Company v. Commissioner of Income-tax for the proposition that if under an instrument of partnership it has been constituted for a fixed term, then on the expiry of that term registration of the firm could not be allowed. The argument advanced before the Commissioner with reference to section 17(b) of the Partnership Act was rejected. The Tribunal seems to hold that the partnership created by the deed dated May 23, 1961, was a new one and, hence, registration could not be allowed on the basis of a declaration filed by the assessees in accordance with section 184(7) of the 1961 Act. I shall presently show that both the Commissioner and the Tribunal have committed errors of law and have misdirected themselves in that they have not applied the correct principle of law which was applicable to the facts of the case. Application for the renewal of registration of a firm was provided in section 26A of the 1922 Act. The application for the renewal had to be made in the form prescribed in rule 6. In paragraph 2 of tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one. " The scheme of registration or its renewal has undergone a change under the 1961 Act, and the forms in force after coming into force of that Act are different. Under section 184(1), an application for registration of a firm has to be made to the Income-tax Officer on behalf of the firm if the partnership is evidenced by an instrument and the individual shares are specified in that instrument. There is a separate form given for making such an application. Sub-section (7) of section 184 provides: "Where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year : Provided that- (i) there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted ; and (ii) the firm furnishes, along with its return of income for the assessment year concerned, a declaration to that effect, in the prescribed form and verified in the prescribed manner. " The scheme under the 1961 Act, therefore, is that once registration is granted to any firm for any assessment year under the 1961 Act, the registration shall have effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n there is a change in the personnel but also when there is a change in the shares of the partners. I have referred to this aspect of the matter to indicate as to what is meant by the expression " change in the constitution of the firm " occurring in sub-section (7) of section 184 of the 1961 Act. The only requirement of the declaration given under the said provision of law is that there is no change in the constitution of the firm or that the shares of the partners as evidenced by the instrument of partnership on the basis of which registration was granted had remained unchanged. On the facts of this particular case, registration was granted and renewed under the 1922 Act, on the basis of the instrument of partnership dated May 31, 1956. Even on execution of the partnership deed dated May 23, 1961, there was no change either in the personnel of the partners or in their shares. That being so, the requirement of proviso (i) was fulfilled. Undoubtedly, the declaration as required by proviso (ii) of sub-section (7) of section 184 had been filed. Even according to the new Form No. 12, the statement in paragraph (ii) was not inconsistent with the true state of affairs of the assessee-f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There was no substantial change in regard to the payment of interest on the capital investment of the partners. A sum of Rs. 4,000 was invested, free of interest, and any party investing more than his share will be entitled to interest at 61 per cent. per annum on that amount. In regard to the carrying on of the business also by other firms, there was merely a change in the phraseology, but no other substantial change. I have, therefore, no difficulty in holding that it was not a new partnership which was created by the new deed, rather the old one was continuing. Therefore, an application under section 184(1) of the 1961 Act for the registration of the firm was not necessary. Nor the ratio decidendi of the case of National Motor Company was applicable. It is doubtful whether the view expressed by the Bombay High Court in that case will hold good under the provisions of the 1961 Act. Section 17(b) of the Partnership Act makes the continuance of a partnership constituted for a fixed term as a partnership at will without any fresh deed. But for the purposes of the renewal of registration this could not be so as held by the Bombay High Court, because the instrument of partnership und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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