TMI Blog1966 (10) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... and losses among the three members of the yarn shop and those admitted to the benefits of the partnership was clearly indicated. It was, however, pointed out that the yarn shop as such was not introduced as a partner and the agreement was in truth between the three major members out of those who constituted the yarn shop and four outsiders. Each of them had signed the application and the covenants of the partnership agreement bind the partners individually. The indication in the deed of partnership that three of them held qua the yarn shop a certain relation did not affect their status as partners of the appellant-firm individually. The principle laid down in this case applies also to the present case and, for the reasons already expressed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the deed of partnership executed on March 19, 1950. This document recites that the three brothers have agreed to continue the business of the two branches at Nagpur in partnership on the terms mentioned in that document. For the purpose of this case, it is not necessary to reproduce all the terms of the partnership deed. It is sufficient to reproduce only four terms as follows : " 3. The capital of the partnership shall be Rs. 2,40,000 (Rupees two lakhs forty thousand) divided into 15 shares of Rs. 16,000 each. The partners hereby agree that the shares allotted to different partners will be equal, i.e., each partner will get five shares. . . . 10. After meeting all expenses, interest and other charges, the resulting net profit or lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessment year 1953-54, the partners again applied for renewal of registration on the basis of the same deed, but the Income-tax Officer was of the opinion that there was no clause in the deed specifying the individual shares of each partner as required by section 26A of the Act. After issuing notices to the three partners and after giving them a hearing, the Income-tax Officer, by his order dated March 28, 1958, rejected the application of the partners for renewal of registration of the firm. The assessee took the matter in appeal to the Appellate Asssitant Commissioner but the appeal was dismissed. The assessee preferred a second appeal to the Appellate Tribunal but that appeal also was dismissed. At the instance of the assessee, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the income of the firm. This is an important benefit to which the partners of a registered firm become entitled as a consequence of registration and if it is intended to secure that benefit, the requirements of section 26A of the Act and the Rules framed under the Act must be strictly complied with. Rule 2 of the Income-tax Rules framed under section 59 of the Act requires that the application shall be signed by the partners (not being minors) personally, and prescribes the period within which the application shall be made for the year in question. Rule 3 provides that the application shall be made in the prescribed form and shall be accompanied by the original instrument of partnership under which the firm is constituted, together with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses 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 specified, namely, that each partner was allotted an equal one-third share and there was hence specification of the individual shares of the partners within the meaning of section 26A of the Act. In our opinion, the argument of the appellant is well-founded and must be accepted as correct. It is evident that under clause (3) of the partnership deed, the capital allotted to each partner is equal, viz., 5 shares of Rs. 16,000 each in a total capital of Rs. 2,40,000. Clause (10) states that " after meeting all expenses, interest and other charges, the resulting net profit or loss shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm B, was constituted, with five partners, under a deed of partnership in which firm A was described as the first partner and its members were collectively shown as having a share of 6 annas 9 pies in the profits of the larger firm. The fact that four minors were admitted to the benefits of partnership in firm A with equal shares in the profits but losses were to be shared only by its three major partners was, however, recited in the preamble to the deed of partnership of firm B. The deed of partnership of firm B was signed by all the major partners of firm A. The question at issue was whether firm B was entitled to be registered under section 26A of the Act. It was held that the firm was entitled to be registered and that registration co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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