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TMI Blog1982 (1) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 1975. Before the ITO, a certified copy of the instrument evidencing the partnership in question was filed along with an application in Form No. 11. The ITO on perusal of account books and the statement of account attached with the return found that the profits were divided equally amongst four partners. According to the ITO, the division of profits was against cl. 6 of the partnership deed dt. 6th October, 1975. According to the ITO, the certified copy of the partnership deed shows that S/Shir Bhagwanda Rambhai Patel. Chimanbhai Muljibhai Patel, Becharbhai Rambhai Patel and Pravinchandra Chimanbhai Patel, were to share profits at the rate of 30%, 25%, 25%,and 20%, respectively. Thus, the ITO was of the view that no genuine firm was in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled a certified copy of the partnership deed alongwith application in Form No. 11. According to the certified copy, S/Shri B.R. Patel, C.M. Patel, B.R. Patel and P.C. Patel were to get share of profits at the rate of 30%, 25%, 25% and 20%, respectively. The profits were divided equally in the account books maintained by the assessee. So, on the basis of material on record, it was found that distribution of profits was not done in accordance with the cl. 6 of the certified copy of the partnership deed which was filed before the ITO in 1975. According to the ld. Deptl. Rep., if subsequently the partnership deed was amended and amended partnership deed as filed before the ITO, the assessee cannot get the benefit of registration on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order u/s 185(1)(b) of the Act. Even the assessment was completed subsequently. In the books of account, the profits were divided according to the profits sharing ratio, as specified in the amended partnership deed. Even in the return filed by the assessee, the profits were divided in accordance with the profits sharing, ratio as specified in the amended partnership deed. The ITO does not say that amended partnership deed was not genuine and it was not voluntarily executed by all the partners. Under the circumstances, it can be properly said that the partners amended the partnership deed pertaining to the cl. 6 of the deed which in profits sharing ratio were specified. According to the amended partnership deed, all the partners were to get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K.D. Kamath and Co. Vs. CIT, Mysore (1971) 82 ITR 680 (SC). 9. The ITO can refuse to register a firm if it was not a genuine firm within the constitution specified in the partnership deed. The firm must actually exist. It should not be a sham transaction or a mere pretence. The expression 'genuine firm' denotes that the firm is really in existence and that the partners are collectively carrying on the business. Genuineness is also inter-related to the specified constitution of the firm. The constitution of the firm refers to the identity of the partners and their shares in the profit or loss of the firm's business. If it is found that the partners have in the instrument of partnership indicated their shares, but, in fact, the have, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdance with the clauses of the partnership deed. The profits were divided accordingly. So a valid and genuine firm was in existence in the year of account.
12. The decision relied on by the department is not applicable on the facts of the present case. In that case, as a fact, it was found that division of profits amongst partners was not made in accordance with profit sharing ratio as specified in the partnership deed. Under the circumstances, the said decision is not applicable on the facts of the present case.
13. For the reasons discussed above, in my opinion, the finding of the ld. AAC is correct and no interference is called for. In the result, the appeal fails and the same is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X
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