Law: Income Tax Act, 1922

Section: 26A,23

Section 184 of the Income-tax Act, 1961 (corresponding to section 26A of the Indian Income-tax Act, 1922) - Firm - Position prior to 1-4-1995 - Assessment years 1959-60 to 1961-62 - Whether, benamidar of a partner, qua other partners, has separate and real existence ; he is governed by terms of partnership deed; his rights and liabilities are governed by terms of contract and by provisions of Partnership Act; his liability to third parties for acts of partnership is co-equal with that of other partners; other partners have no concern with real owner ; they can only look to him for enforcing their rights or discharging their obligations under partnership deed - Held, yes - Whether genuineness of firm is not affected by mere fact that one of the partners is benamidar of some other person - Held, yes - Whether, simply because a partner is benamidar or nominee of his father, registration of firm cannot be refused - Held, yes FACTS By a deed of partnership, a partnership firm was constituted to carryon business of speculation and brokerage. It consisted of four partners, 'A, B, C' and 'D'. From the beginning of Samvat year 2014, i.e., 24-10-1957, the firm was reconstituted. 'C' and 'D' retired from the firm and 'E' the son of erstwhile partner, 'C' was brought in as a new partner. That change was effected by a deed of partnership dated 8-1-1958. Under that deed that three partners. 'A', 'B' and 'E' were to have share in the profits of the brokerage business and speculation business as indicated therein. The reconstituted firm was to succeed to the assets and liabilities of the old concern. The reconstituted firm applied for registration under section 26A of the 1922 Act for the relevant assessment years. The ITO refused to register the firm holding that the firm had sought registration on the strength of a deed of partnership which was not genuine. He found on examination of the books of account vis-a-vis the partners that 'E' was not a real partner but was an ostensible partner and the real owner of his share was his father, 'C'. On the ground that the bank account opened with the Bank of Baroda by the firm showed 'C' as a partner of the firm. Thus, although…

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