Law: Income Tax Act, 1922

Section: 26A

Sections 184 to 186 of the Income-tax Act, 1961 (Corresponding to section 26A of the Indian Income-tax Act, 1922) - Firm - Registration of - Assessment year 1956-57 - New firm was constituted - Partnership deed of which indicated that three of partners held certain relation qua a yarn shop and yarn shop collectively had share in profits and loss in firm - Out of share of profit all seven members constituting yarn farm, both major and minor, were entitled to share profit equally whereas losses were to be shared by major members only - In fact only major members of yarn farm and some other outsiders entered into agreement to form new firm and each of them signed application and partnership bound them individually - Whether indication in deed that some partners held qua yarn shop certain relation would not affect their status as partners of firm individually - Held, yes - Whether since in instant case shares were defined though they were not worked out in precise fractions, partnership would not be affected and registration was to be granted to it - Held, yes Words and phrases :- Word 'Specify' as occuring in section in 26-A of the Indian Income-tax Act, 1922. FACTS Appellant, a firm, applied for registration - His members included some individuals as well as a firm being a yarn shop the ITO rejected the application, and his order was confirmed in appeal by the AAC and by the Tribunal. The Tribunal held that because in the deed of partnership, benefits to which certain minors were admitted, and particulars "about the distribution of profits or losses in the manner in which the firm wanted the same to be distributed" were not specified, and because by the deed of partnership the yarn shop was introduced as a partner in the firm, the privilege of registration under section 26A of the 1922 Act must be denied to the firm. On appeal to the Supreme Court HELD The application in the instant case was rejected by the Tribunal, because in its view the benefits to which the minors were admitted and the shares of the major partners who were members of the yarn shop were not specified, and that the yarn shop was introduced as a partner in the firm. But the Tribunal, erred in…

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