Law: Income Tax Act, 1922

Section: 26A

Law: Income Tax Act, 1961

Section: 184

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 year 1951-52 - Partnership deed relied on by assessee-firm for registration did not mention date on which partnership was constituted nor it clearly specified ratio in which profits of firm were to be shared by partners - Whether, on basis of aforesaid partnership deed, assessee-firm was not entitled to get registration - Held, yes FACTS The assessee-firm made an application for registration. The application mentioned the names of the three partners and stated that they shared the profits one-third in the rupee each and were admitted to the partnership in the year 1125 M.E. but without exact date being given. The ITO refused registration because according to him, there was no instrument of partnership operative and effective for the relevant year 1125 M.E. and clause 4 of the instrument of partnership as to allocation of profit and loss to the deceased partner's heirs also stood in the way. In appeal by the assessee, the AAC sanctioned registration. In his view the non-mention of the date of commencement of the partnership in the application or of the retrospective operation of the instruments of partnership as from 1-1-1125 were not of much consequence in the matter. In further appeal by the Department, the Tribunal concurred with the ITO and restored his order refusing registration. On reference: HELD It is clear from a mere reading of section 26A of 1922 Act that firstly, the firm sought to be registered should be constituted under the instrument of partnership, and secondly that the instrument must specify the individual shares of the partners. The partnership deed relied on by an applicant for registration must record the anterior date on which the partnership was constituted. To the extent therefore, that it was conceded that the instrument offered for registration was silent on this matter, the first requisite could not be said to be satisfied. As regards non-mentioning of the extent of profits in the instrument of partnership, the view taken in Khimji Wali & Co. v. CIT [1954] 25 ITR 462 that the…

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