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Section 185 of the Income-tax Act, 1961 - Firm - Position prior to 1-4-1993 - Assessment year 1967-68 - Assessee-firm was refused registration on ground that distribution of profits was not in accordance with partnership deed and hence it was not genuine firm - Tribunal without expressing its opinion on question of non-genuineness refused registration merely on ground of unequal distribution of profits - Whether merely because share of one of partners was further distributed, it would not mean that within partners distribution of profit was unequal - Held, yes - Whether matter as to genuineness of firm was to be considered keeping in view overall picture of dealings between partners and since Tribunal left that question open it was to be directed to send a supplementary statement to High Court after deciding that question - Held, yes (Matter remanded back) FACTS 'D', 'Y' and 'R' were partners in a firm constituted under the partnership deed dated 1-12-1964. On 1-12-1966, another partnership deed was executed which was operative from 1-9-1966. By the subsequent deed, 'S' was taken as partner in place of 'R'. The new partnership deed provided that the profit and loss of 'D', 'Y' and 'S' in the firm would be 40 paise, 35 paise and 25 paise respectively provided that for the year ending on 31-3-1967, 'S' would be entitled to profits only out of 7/12ths profits of the year; to the other 5/12ths the old partners would be entitled in their specified shares in the old deed dated 1-12-1964. The application for registration of the firm was rejected by the ITO on the ground that the profits had not been allocated amongst the partners in accordance with the partnership deed and, therefore, the firm was not genuine. The AAC affirmed the view of the ITO. On further appeal, the Tribunal held that the distribution of profit was not in accordance with law but it did not express any opinion on the question of non-genuineness of the firm. On reference : HELD The profits were distributed strictly in accordance with the deed of partnership. It was the share of one of them that was further distributed. That did not mean that within the partners the distribution of profits was…

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