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Section 185 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 1955-56 - Whether a firm which comes into existence by a verbal agreement is entitled to be registered under section 26A of 1922 Act, if on date of application for registration terms and conditions of partnership have been reduced to writing and application for registration has been accompanied by such an instrument - Held, yes FACTS The assessee-firm came into existence by a verbal agreement dated 1-4-1954, which was on terms and conditions reduced to writing on 8-4-1954. The assessee sought registration on the basis of the partnership deed dated 8-4-1954. ITO refused to grant registration on various grounds. On second appeal, the Tribunal held that the firm was not constituted under an instrument of partnership inasmuch as the instrument of partnership executed on the 8-4-1954, categorically stated that the partnership had come into existence on the 1-4-1954. The Tribunal, therefore, dismissed the assessee's appeal. On reference : HELD In Niadar Mal Jagdish Parshad v. CIT [1959] 37 ITR 349 , 352 the question whether a firm which comes into existence by a verbal agreement is entitled to be registered under section 26A, if on the date of the application for registration the terms and conditions of the partnership have been reduced to writing and application for registration has been accompanied by such an instrument was answered in the affirmative by the full Bench. Therefore, in the instant case, the applicant firm which was formed by an oral agreement on 1-4-1954, on terms and conditions reduced to writing on the 8-4-1954, was one constituted under an instrument of partnership within the meaning of those words in section 26A and entitled to registration. Note : The case was decided in favour of the assessee. CASES…

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