Law:

Section:

Section 184 of the Income-tax Act, 1961 [Corresponding to section 26A of the Indian Income-tax Act, 1922] - Firm - Position prior to 1-4-1993 - Assessment years 1943-44 and 1944-45 - Three companies namely S, E and B carried on trade in rise and its by products - All shares of B were held by S who were also its managing agents - An agreement was entered into between S, E and B for amalgamated working of rice business under management of 'S' Ltd. - Thereupon assessee combination of S, E and B made application under section 26A of 1922 Act for registration of their partnership - Said application was signed by S and E only - High Court opined that partnership was a partnership of three companies and as application was not made by said three companies and partnership deed did not specify their respective shares, registration could not be granted - On instant appeal, it was seen from records that B was a partner along with S and E in combination and had joint share with S in profit or loss of combination - It was entitled to terminate partnership by giving notice to other parties - It also had right to refer all disputes arising between partners to be decided by arbitration - Whether in aforesaid circumstances, there was not slightest doubt whatever that B was a partner with S and E in business of combination and partnership which was entered into under terms of agreement was partnership between three partners viz. S, B and E - Held, yes - Whether, therefore, High Court rightly held that partnership was not really between 'S' and 'E' and, consequently, registration could not have been allowed under section 26A of 1922 Act - Held, yes FACTS Prior to 29-11-1928 S Ltd. and E Ltd. carried on trade in Burma rice and/or its by-products, apart from the selling of rice, both these companies had rice milling machines and produced rice from paddy. There was another company known as the B Ltd. This company also had a few rice mills. It never purchased paddy or sold rice. All the shares of this company were held by 'S' Ltd., who were also its managing agents. On or about 29-11-1928, an agreement was entered into between the S, E and B to provide for the amalgamated working of…

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