Law:

Section:

Section 26A of the Indian Income-tax Act, 1922 [corresponding to section 185 of the Income-tax Act, 1961] Firm Registration - Application for Assessee-firm constituted under a deed specifying shares in profit of major partners and minors admitted to benefits of partnership and providing that major partners would bear losses without specifying such ratio ITO refused registration for assessment year 1959-60 AAC and tribunal granted registration Whether tribunal right in law Held, on facts, yes Facts The assessee-firm was constituted under a partnership deed dated 12-8-1942 with two brothers GVS and GVR as partners in the capacity of karta of their respective HUF's which owned the firm's business originally with equal share in the profits and losses. There were genuine partitions of all movable and immovable properties of both the families by 30-9-1958. On 1-10-1958, a fresh partnership deed was drawn up and all the four major members of the two divided families qecame partners, including eight minors admitted to the benefits of the partnership. Clause 10 of the deed stipulated that the losses would be borne by the four major partners only. However, a supplemental deed was also executed on 15-8-1959 indicating the ratio of losses to be divided between the four major partners. Each of the two kartas had three sons giving rise to three more branches to each family. The original 50 per cent share of each karta was divided between the karta and the three branches. The profit-sharing ratio, as per the new deed, was as under : Name Share in profit 1. CVS 2. Smt. GA (widow of deceased son of GVS) 41/ 6% 3. GPR, minor (son of GA) 41/ 6% 12½% 4. GSB(son of COA) 41/ 6% 5. GSR (son of GVS) 41/ 6% 6. GSB, minor (son of GSR) 41/ 6% 12½% 7. GRK, minor (son of GSR) 41/ 6% 8. GMR, minor (son of GVS) 12½% 9. GVR 12½% 10. GGB (son of GVR) 12½% 11. GR minor 12½% 12. GKR, minor (son of GVR) 12½% The assessee-firm duly applied for its registration under section 26A of the 1922 Act on 20-1-1959 for the assessment year 1959-60. The ITO refused to grant registration on the ground that the partnership deed dated 1-10-1958 was silent about the exact proportion in which the losses, if any,…

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