Law: Income Tax Act, 1922

Section: 184,185

Income-tax----Firm---Registration---Minor admitted to benefits of partnership--¬Partnership-deed not specifying ratio in which losses to be apportioned--¬Income-tax Officer must construe partnership-deed reasonably---Statements in prescribed form accompanying application clearly stating ratio in which major partners to bear losses---Firm entitled to registration---Indian Income Tax Act, 1961 & Ss. 184, 185---Indian Partnership Act, 1932, S.13---[A& CIT v. Progressive Financiers (1979) 118 ITR 18 reversed]. The Assessing Officer cannot reject an application for registration a firm merely because, in the deed of partnership, the shares of the partners are not expressly specified. The Assessing Officer will have to construe the instrument of partnership as a whole, and if reasonably the shares of the partners in profits and losses can be ascertained accept it as genuine for the purpose of registration. Even if the shares of the partners were not expr6y specified in the instrument of partnership but they could be ascertained by the Income-tax Officer from the application and the required information supplied therewith, then the requirements of the law could be said to have been satisfied. Where the shares of the partners in. the profits of the firm re unequal, the losses must be shared in the same proportion as the profits if there is no agreement as to how the losses are to be apportioned. The appellant-firm came into existence with the execution of a partnership deed on July 1, 1967. It consisted of four partners and a minor admitted to the benefits of partnership. The minor's contribution to he capital of the firm was 37.5 per cent., and that of the others was 25 per cent., 12.5 per cent., 12.5 per cent and 12.5 per cent, respectively. the firm applied for registration for the assessment year 1968-69. The Income-¬tax Officer refused to grant registration on the ground that the clauses in the partnership deed showed that the minor was taken as a full partner and that it was not stated in the partnership deed how the losses, if any, were to be apportioned. Continuation of registration for the assessment years 1969-70 and 1970-71 was also refused. On…

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