Law:

Section:

Section 184 of the Income-tax Act, 1961 - Firm - Registration - Entitlement to - Assessment year 1976-77 - Originally assessee-firm was constituted by seven partners - Oat of seven partners, four of them expressed their desire to retire from firm with effect from 1-4-1975 - Three other original partners agreed to take one M as a partner and a deed was entered into between three partners and III on 25-8-1975 - Deed was to be effective from 1-4-1975 - Whether in view of facts that M was minor on 1-4-1975 but was major on date when deed was entered into, i.e. , 25-8-1975, a valid partnership deed was said to be entered into and, thus, assessee was entitled to registration for assessment year in question - Held, yes Facts The assessee-firm was originally constituted by seven partners. Out of the original seven partners, four of them expressed their desire to retire from the firm with effect from 1-4-1975. The three other continued. They agreed to take one M as a partner. A deed was entered into between the three partners, who were original partners, and M on 25-8-1975. For the assessment year 1976-77, the assessee claimed registration. The ITO noticed that as per clause 2 of the deed, the reconstituted partnership should be deemed to have come into force with effect from 1-4-1975 and on that day M was only a minor. He, therefore, held that M could not be a partner on 1-4-1975 and so the assessee was not entitled to registration for year in question. On appeal the Commissioner (Appeals), held that the assessee was entitled to registration. On appeal by the revenue, the Tribunal held that M had entered into the partnership at the time when he was competent to contract, i.e., on the date of deed, namely, 25-8-1975. Clause 2 of the partnership deed did not make M a partner on 1-4-1975. It was provided only for the purpose of taking accounts. Since a valid partnership deed was entered into on 25-8-1975, the assessee was entitled to registration. On reference : Held In the instant case M became a partner only on 25-8-1975, on the date when the deed was entered into. All that clause 2 of the deed provided was that the firm was to take accounts back to the date from…

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