Law:

Section:

Section 185 of the Income-tax Act, 1961 (Corresponding to section 26A of the Indian Income-tax Act, 1922) - Firm - Position prior to 1-4-1989 - Assessment year 1947-48 - Whether where oral partnership was alleged to have come into existence during relevant accounting year but instrument of partnership executed after accounting period, partnership was could not be registered - Held, yes FACTS An application was made on behalf of the alleged partnership, said to be carrying on business from November, 1945, for registration of the firm under section 26A of the 1922 Act. The Income-tax authorities were not satisfied about the truth of the formation of the firm at the time mentioned. The registration prayed for was for the purpose of the assessment for 1947-48, the relevant previous year being 24-11-1945, to 26-10-1946. An instrument of partnership between the alleged partners was executed, however, only on 23-3-1948. The Tribunal held that as the firm was on its own admission formed orally in November, 1945, and was not constituted under an instrument of partnership, it was not entitled to be registered under section 26A of the 1922 Act. On reference: HELD The Division Bench in Kalsi Mechanical Works v. CIT [1953] 24 ITR 353 and Padam Parshad Rattan Chand v. CIT [1954] 25 ITR 335 has held that where an oral partnership is alleged to have come into existence and that oral partnership was followed by a partnership deed executed after the accounting period the partnership cannot be registered as having taken place before…

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