Law:

Section:

Section 184 to 186 of Income-tax Act, 1961 [Corresponding to section 26A of Indian Income-tax Act, 1922] - Firm - Registration - Assessment year 1949-50 - Partners of assessee firm describing themselves as representative of their respective smaller partnership firm, signed deed of partnership as such - Tribunal found that deed of smaller firm did not show in what proportion the share allotted to member of assessee-firm had to be divided by him and his other co-partners in the smaller-firm - The Tribunal, consequently, held that the assessee-firm was not entitled to registration under section 26A - It, accordingly, dismissed the appeal and directed ITO to give to the assessee the status of an unregistered firm instead of an association of persons - Whether Tribunal's finding that assessee-firm could not be registered, was correct, and since smaller firm as such could not enter into partnership, it was essential that all partners of smaller firm should have been partners of assessee and their share specified in partnership deed - Held, yes FACTS For the assessment year 1949-50, the ITO granted registration to the assessee-firm consisting of 16 partners under section 26A. However, the Commissioner acting under section 33B, directed the ITO to reframe the assessment treating the firm as an AOP on the ground that the partners were representing their respective partnership firms and, therefore, the number of partners of all these smaller firms had to be counted for the purpose of ascertaining the total number of partners of the assessee-firm. According to him, since this number exceeded 20, it was not entitled to registration. On appeal the Tribunal found that the deed of smaller firms did not show in what proportion the share allotted to member of assessee-firm had to be divided by him and his other co-partners in the smaller-firm. The Tribunal, consequently, held that the assessee-firm was not entitled to registration under section 26A. It, accordingly, dismissed the appeal and directed ITO to give to the assessee the status of an unregistered firm instead of an association of persons. On reference : HELD The partnership deed clearly mentioned that the partner was…

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