Law:

Section:

Income-tax----Firm-Renewal of registration-Application for Registration refused for earlier year-Partnership deed silent about liability for a portion of loss-Whether firm entitled to renewal of registration-Income-tax Act, 1961, S. 184(7). The assessee-firm of three partners, Chinnamma and her two sons, Thomas and Joseph, of whom Joseph was a minor represented by his mother as guardian, was reconstituted by a deed dated December 1, 1960, which provided that the profit and loss of the business would be divided among the three partners in the ratio of 50: 25 :25. A deed of clarification was executed between Chinnamma and Thomas on March 26, 1963, which stated that the minor was only a beneficiary entitled to 25 per cent. of the profits but not liable for the loss and liabilities of the firm and that the deed of clarification should be deemed to have come into effect on December 1, 1960, and treated as part of the deed of December 1, 1960. The assessee filed a declaration under section 184(7) of the Income-tax Act, 1961, for renewal of registration for the assessment year 1963-64. The Appellate Tribunal refused registra tion on the ground that the clarification deed did not provide who should bear 25 per cent. of the loss and that, as the clarification deed brought about a change in the shares of the profit and loss of the firm, there was a change in the constitution of the firm and, therefore an application for registration of the firm was necessary. On a reference to the High Court: Held, that the firm was not entitled to renewal of registration as the clarification deed did not provide for sharing of 25 per cent. of the loss and, as the firm had been refused registra tion for the earlier year, an application for registration was necessary. Commissioner of Income-tax v. Dwarkadas Khetan & Co. (1961) 41 I T R 528 ; Sannappa (R) & Sons v. Commissioner of Income-tax (1967) 66 I T R 27 ; Thacker & Co. v. Commissioner of income-tax (1966) 61 I T R 540 ref.                                                        …