Law:

Section:

Section 256 of the Income-tax Act, 1961 - Reference - Power of High Court to (A reframe questions - Whether it is open to High Court to reframe or recast a question formulated by tribunal before answering it so as to bring out real issue between parties - Held, yes Section 185 of the Income-tax Act, 1961 - Firm - Registration - Genuineness of - Whether concept of partnership being valid is distinct from its factual genuineness and for purpose of granting registration both aspects are relevant - Held, yes - Whether a finding that partners of assessee-firm are benamidars of others would not be a bar to grant registration to assessee, if firm is otherwise genuine - Held, yes Facts The assessee-firm consisted of two partners, namely, P and S, each having 50 per cent share in the profits and losses of the firm and it was being granted registration prior to the assessment year 1961-62. On 1-4-1960 P and S entered into a fresh deed of partnership by virtue of which P and S of the one part and SS, GS, H and HS of the second part became partners with the following share ratio in the profits and losses : P and S retaining 25 per cent share each while other four partners were given 12 per cent share each. Admittedly, SS and GS were related to P who were obviously accommodated within the 50 per cent share originally owned by P while the other two incoming partners H and HS were related to S who were accommodated within the 50 per cent share originally owned by S. Moreover, prior to 1-4-1960 H and HS were already working as empolyees in the original firm. The new partnership deed provided, inter alia, (i) that the parties of the second part, i.e., the four new incoming partners, were not required to contribute any capital but the original partners were to do so in equal shares, (ii) that H and HS would continue to draw their salaries, etc., from the assessee as was being drawn by the earlier partners, (iii) that the four new incoming partners would not interfere in the management or the affairs of the partnership business, and (iv) that none of the four new incoming partners would sell, mortgage, hypothecate, gift or will away or alienate in any way whatsoever his share to…

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