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TMI Blog1966 (10) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... /3rd share in the partnership firm. Prior to November, 1949, the three partners of the assessee-firm in partnership with eight others carried on business in Bombay and other places in the name and style of " Rajnikant Vitheldas & Co. " In that larger firm, each one of the three brothers had an equal two annas share, the other eight partners having the remaining ten anna share. The larger partnership of Rajnikant Vitheldas & Co. was dissolved on October 31, 1949, and on its dissolution the business of the two branches thereof at Nagpur was allotted to the three brothers, who thereupon as from November 1, 1949, constituted themselves into a new firm, viz., the assessee-firm, under the deed of partnership executed on March 19, 1950. This docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... einafter called " the Act "). Along with this application, the deed of partnership dated March 19, 1950, was produced. By his order dated March 20, 1956, the Income-tax Officer granted registration under section 26A of the Act for the assessment year 1951-52. On the same day, he determined the total income of the firm at Rs. 87,172 and under section 23(6) of the Act, allocated it between the three partners for tax purposes, each partner getting one-third share of the total income, i.e., Rs. 29,057. On the basis of the same deed, an application was made for the renewal of registration of the firm for the assessment year 1952-53. The renewal was granted on March 28, 1957. For the assessment year 1953-54, the partners again applied for renewal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm, constituted under an instrument of partnership specifying the individual shares of the partners, for registration for the purposes of this Act and of any other enactment for the time being in force relating to income-tax or super-tax. (2) The application shall be made by such person or persons, and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed ; and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed. " By securing registration under the Act, the partners of the firm obtain a benefit of lower rates of assessment and no tax is directly charged on the income of the firm. This is an important benefit to which the partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under which their business is carried on is called the " firm name ". Section 13 of Partnership Act provides as follows : " 13. Subject to contract between the partners-- (a) a partner is not entitled to receive remuneration for taking part in the conduct of the business ; (b) the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm. . . " 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year in question. It was pointed out by this court in Kylasa Sarabhaiah v. Commissioner of Income-tax that, although the application for registration of a firm under section 26A of the Act had strictly to be in conformity with the Act and the Rules, in ascertaining whether the application was in conformity with the Rules, the deed of partnership had to be reasonably construed. In that case, there were three major partners in firm A in which four minors were admitted to the benefits of partnership. Its profits were to be shared equally between the seven persons whereas the losses were to be shared by the three major partners equally. A larger firm, firm B, was constituted, with five partners, under a deed of partnership in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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