Law:

Section:

Section 185, read with section 256 of the Income-tax Act, 1961 - Firm - Position prior to 1-4-1993 - Assessment years 1969-70 to 1971-72 - RK was carrying on business as a sole proprietor - Subsequently, a partnership was allegedly constituted between RK, RR and a minor admitted to benefit of partnership - Tribunal found that no contract was taken in name of so called partnership firm nor there was any separate bank account in its name in year of account which remained in same name of which RK was proprietor - Further, entire labour personnel remained same and no evidence was produced how RR with a meager salary of Rs. 150 was able to invest Rs. 1,000 as his capital - It was also found that RR had no real knowledge of business - Accordingly, Tribunal held that it was not a case of genuine partnership - Whether on consideration of all facts and circumstances existing at inception of partnership and facts immediately leading thereafter, there remained no doubt that Tribunal had arrived at correct conclusion - Held, yes - Whether, therefore, no question of law arose from Tribunal's order - Held, yes FACTS One RK was carrying on business as contractor registered with Government Departments for some years as a sole proprietor, under the name Ranu Bros. A partnership firm was alleged to have been constituted by a partnership deed dated 3-11-1967, by taking RR, an employee of RK, as the second partner and admitting a minor to the benefits of partnership. Subsequently, another partnership deed was executed by taking the said minor as partner as he had attained majority. The firm applied for registration for the assessment years 1969-70 and 1970-71 and continuation for registration for the assessment year 1971-72. The ITO refused registration holding that the said partnership was not a genuine one. On appeal, the AAC decided in favour of the firm. However, the Tribunal after considering the entire facts and circumstances including the surrounding circumstances at the time when the partnership agreement was entered into, the manner in which the accounts of the business were kept, the right to receive profits and liabilities, the right to control the business and various…

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