TMI Blog1979 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... 66. The relevant previous year is from Diwali 1963 to Diwali 1964. M/s. Ganesh Rice Mills was constituted as a partnership firm by an instrument of partnership executed on 25th October, 1956. The firm consisted of the adult partners, namely, Chandra Shekhar Trivedi and Shyam Manohar. The adult partners had each 6 annas share in the profits of the firm. The minor, Narayan Prasad, was admitted to the benefits of the partnership. He was given 4 annas share in the profits. The partnership was granted registration up to the assessment year 1964-65. An application was filed for allowing the continuation of the registration of the partnership under s. 184(7) on 1st July, 1965, for the assessment year 1965-66. This application was signed by Shyam M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted; 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 form of declaration prescribed under prov. (ii) to s. 184(7) is Form No. 12, which is as follows: " Declaration under section 184(7) of the Income-tax Act, 1961, for continuation of registration. To, The Income-tax Officer, ............ Re: Assessment year 19-19. We, on behalf of.....declare that: (i) our firm was granted registration for the assessment year 19...-19..., vide order dated ...... 19...., passed by the Income-tax Officer... and (ii) there has been no change in the constitution of the firm or the shares of the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artners as evidenced by the instrument of partnership " refer to their shares in profit and loss as disclosed by the instrument of partnership. Section 2(23) of the Act defines a partner to include a minor admitted to the benefits of partnership. In view of this special definition, it cannot be said that when minor admitted to the benefits of a partnership becomes a major, and so becomes a partner in the real sense by becoming liable for losses also, there is any change in the identity of partners. The question that generally arises in such cases is whether when the minor becomes a major and becomes liable for losses also, there is any change in " the shares of the partners as evidenced by the instrument of partnership " ? If the instrument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership within the meaning of the first proviso to s. 184(7). We respectfully agree with the view taken by the Allahabad High Court. The question then is whether, in the instant case, the instrument of partnership on a reasonable construction can be said to provide for the reallocation of losses on the minor becoming a major. The relevant clauses of the instrument of partnership are cls. (2) and (3), which read as follows : " (2) That the shares of the partners in accordance with which they shall be entitled for profits or be liable for losses shall be as below : Serial No. Name of partners Extent of shares 1 Chandra Shekhar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of the partners which was not evidenced by the instrument of partnership. The facts before us are similar to the facts in Reference No. 510/74 decided by the Full Bench in Badri Narain Kashi Prasad v.Addl.CIT [1978] 115 ITR 858(All). We hold that there was no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the ground that the minor partner, Narayan Prasad, became major and started sharing losses after 1st March, 1963. The learned counsel for the department drew our attention to another Full Bench judgment of the Allahabad High Court in Addl. CIT v. Gauri Vishwanath Dal Mills [1977] 107 ITR 274. In that case, however, the instrument of partnership was such that it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the Tribunal that on the retirement of Chandra Shekhar there was a dissolution of the firm. The Tribunal has held that on the retirement of Chandra Shekhar there was a change in the constitution of the firm which was continued by the remaining partners. In this connection the Tribunal has referred to cl. (3) of the instrument of partnership executed on 5th April, 1964, in which it is stated that on the retirement of Chandra Shekhar with effect from 11th March, 1964, the remaining partners, namely, Shyam Manohar and Narayan Prasad, reconstituted the firm and continued the partnership business. The question, whether, when a partner retires, a new firm comes into existence or the old firm continues, is always a question of fact to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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