Law:

Section:

Section 186(1) of the income-tax act, 1961-Firm-Cancellation of registration-Whether registration can be cancelled on the ground that a person joined partnership in a dual capacity and signed partnership deed twice-Held, no Facts The assessee-firm of six partners, namely, A, B, C, D, E and F, was constituted by a partnership deed dated 13-9-1966 and was granted registration for purposes of income-tax. One of the clauses of the partnership deed provided that the death or retirement of any of the partners would not operate to dissolve the firm, but that the firm may be continued by the surviving or remaining partners on such terms and conditions as may be agreed upon in writing amongst the partners. On 9-2-1970, A died. By a registered Will dated 28-1-1970, A bequeathed all his properties to his three adult sons, namely, B, D and K, who appointed B as their representative to carry on the partnership business by their power of attorney. On 20-2-1970, the remaining partners executed a new partnership deed when B joined in a dual capacity, namely, as a partner himself and as representing the three heirs under the Will of partner A. He accordingly signed the partnership deed twice. The ITO granted registration to the newly constituted firm for the assessment year 1971-72. But, for the assessment year 1972-73, the ITO acting under section 186(1) cancelled the registration on the only ground that B had joined the partnership deed in two capacities and signed the deed twice, which was not permissible in law. He, therefore, concluded that there was no genuine firm in existence as registered. The AAC upheld the ITO's order. The Tribunal took the view that the surviving or continuing partners could carry on the business of the firm with the estate of the deceased partner and that the position was directly covered by the decision of the Bombay High Court in CIT v. Raghavji Anandji & Co. [1975] 100 ITR 246 . The Tribunal, accordingly, held that there was no valid ground to cancel the registration and the reasons given by the ITO and the AAC were not sustainable in law. On reference, the revenue challenged the validity of the partnership as the shares of heirs of the…

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