Law:

Section:

Section 185 of the income-tax act, 1961-Firm-Registration-Genuineness of-Assessee-firm was formed with nine partners, one of whom was partner in firm s and other eight were wives of other partners in firm s-Capital was contributed by withdrawing from credit balances in firm s and was simultaneously advanced to firm s as interest-bearing loan-Later on two occasions, book entries were made in both firms' accounts indicating that partners of firm s withdrew money and advanced it to assessee-firm, and assessee in turn advanced identical amounts to firm s-Firm s did not have adequate cash balances to cover these transactions-No manager was appointed as envisaged in partnership deed of assessee-firm-Assesses had' no other transactions except those with firm s-Whether assessee could be treated as a genuine firm entitled to registration-Held, on facts, no Facts Firm S had nine partners who were paid interest by that firm on their credit balances. One of the partners and the wives of the eight other partners formed a partnership to constitute the assessee-firm and contributed capital by withdrawing from their credit balances in firm S. The_ amount so contributed was simultaneously shown as having been advanced to firm S by the assessee-firm, as interest-bearing advances. Later, on two occasions, entries were made in the books of both the firms to indicate that partners of firm S withdrew from their credit balances and advanced money to the assessee-firm, which, in turn, showed the amount as having been advanced to firm S. The assessee had no other transaction except those with firm S and had also not appointed a manager as envisaged in its partnership deed. The ITO refused to grant registration to the firm on the ground that it was not genuine and that the whole arrangement was a sham creation to avoid payment of tax by firm S. The AAC and the Tribunal, however, held that the assessee-firm was a genuine entity and that it was entitled to registration. On reference : Held On the two dates on which the partners of firm S were shown as having withdrawn from their credit balances, there was no adequate cash balance infirm S to cover the withdrawals. Thus, apart from making…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492