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TMI Blog1985 (10) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... Clauses 5, 6 and 7 are material. They are as follows: "5. This is to record and confirm that the said minors, Dhankumar Suryakant Doshi, Bahubali Suryakant Doshi, Mahavir Suryakant Doshi and Ajitkumar Suryakant Doshi, have been admitted to the benefits of the said partnership. 6. The net profits of the partnership shall be divided in the following proportion: 1. Ratanchand Bhaichand Doshi 5 paise in a rupee of 100 paise 2. Rajkumar Suryakant Doshi 15 do 3. Dhankumar Suryakant Doshi 20 do. 4. Bahubali Suryakant Doshi 20 do. 5. Mahavir Suryakant Doshi 20 do. 6. Ajitkumar Suryakant Doshi 20 do. 7. The parties hereto and the said four minors are entitled to all the properties in their respective shares in the said partnership. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee from being registered. The judgment of the Supreme Court in Mandyala Govindu & Co. v. CIT [1976] 102 ITR 1, concludes, in our view, the answer to be given to the question posed. The Supreme Court was concerned with deciding question similar in terms to that posed to us. The assessee there was partnership of three persons, having shares of 31%, 23% and 23%, respectively. A minor had been admitted to the benefits of the partnership and had been allotted the balance 23% in profits. The Supreme Court noted that the question was whether in the absence of a specific statement in the partnership deed as to the proportion in which the partners were to share the losses, the requirement of section 26A of the Indian Income-tax Act 1922, could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective shares in the profits, the amount of loss in the minor's share would still remain undistributed. Will the partners between them bear this loss equally, or to the extent of their own individual shares ? To this the instrument of partnership does not even suggest an answer. There is, therefore, no means of ascertaining in this case how the losses are to be apportioned." The judgment of the Supreme Court in Mandyala Govindu & Company's case [1976] 102 ITR 1 was considered by this court in Harkisondas Gokaldas v. CIT [1982] 136 ITR 288. This court noted that though the provisions of section 184 of the Income-tax Act, 1961, had made certain changes as compared to the provisions of section 26A of the Indian Income-tax Act, 1922, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll Bench was a partnership in which minors had been admitted to its benefits. It was contended on behalf of the Revenue that there being no specification of the partners' shares in respect of losses in the partnership deed, the defect was fatal to the claim for registration. Reliance was placed on behalf of the Revenue upon Mandyala Govindu and Company's case [1976] 102 ITR 1 (SC). Counsel appearing amicus curiae on behalf of the assessee contended, on a reading of the partnership deed, that the intention of the partners was clearly to share the losses in the proportion in which they had agreed to share the profits and that, therefore, the Supreme Court decision was distinguishable on facts. The Full Bench noted that the statute only requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The following emerges : The four minors are admitted only to the benefits of the partnership. The two partners and the four minors are liable for the liabilities of the assessee in the proportion of their shares therein. The four minors are not liable for any obligations of the assessee; only their shares in the assessee are liable for its obligations. Pending attainment of majority by the four minors, their shares in the profits would be accumulated to their credit. Clause 7, therefore, provides that in so far as the liabilities of the assessee are concerned, the partners and the four minors admitted to the benefits are liable to the extent of the proportion of their shares in the profits but that, in so far as the liabilities cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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