Law:

Section:

Section 184, read with sections 185, of the Income-tax Act, 1961 (Corresponding to section 26A, read with section 23(4), of the Indian Income-tax Act, 1922) - Firm - Position prior to 1-4-1993 - Assessment year 1950-51 - Whether under section 26A of 1922 Act, if ITO is satisfied that firm is in existence as shown in partnership deed and application has been properly made, he is bound to register it - Held, yes - Whether, however, section 23(4) of 1922 Act gives him overriding power to refuse registration, notwithstanding fact that conditions laid down in rule 4 of Income-tax Rules, 1922 have been complied with, if he assess firm under section 23(4) of 1922 Act - Held, yes - Whether where ITO did not exercise his discretion under section 23(4) of 1922 Act but made only a casual observation in regard to his power under that section and partnership deed filed by firm was valid and conditions laid down in rule 4 were satisfied, ITO was bound to register partnership - Held, yes FACTS The assessee firm had five partners, one of whom was a minor represented by his father and guardian. The partnership was reduced to writing and it was registered under section 26A of the 1922 Act for the assessment year 1949-50. For the assessment year 1950-51, an application for the renewal of registration of the firm was filed under section 26A of the 1922 Act. As objection was taken to that deed on the ground that one of the partners was a minor, a fresh deed of partnership was executed by all the partners, including the quondam minor as by that time he also became a major. For the assessment year 1950-51, as the assessee made default under section 22(4) of the 1922 Act, ITO made the assessment under section 23(4) of the 1922 Act. On the same day, ITO passed an order on the application made under section 26A of the 1922 Act refusing registration on the ground that the deed was illegal as the minor was made liable to share the losses. He also made an observation at the end of the order to the effect that at any rate he was unable to register the firm inasmuch as the assessment of the firm was made under section 23(4) of the of the 1922 Act. When the assessee preferred an appeal…

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