Law:

Section:

Sections 182 to 186 of the Income-tax Act, 1961 [Corresponding to section 26A of Indian Income-tax Act, 1922] - Firm - Registration of - Assessment year 1956-57 - Registration was denied to assessee-firm on ground that another firm had provided share capital appearing in name of 'S', one of partners of assessee-firm, in assessee-firm, and that share of profits in assessee-firm allotted to 'S' was divided between partners of that firm - However, it was found that firm was not a bogus one or not one which had no legal existence - Further partnership deed had specified amount of share capital contributed by its partners as also share of profit to which each was entitled to from assessee-firm - Whether since rule 2 of rules framed under section 26A had been complied with registration could not be refused to assessee-firm - Held, yes FACTS For the assessment year 1956-57, the assessee-firm applied for registration under section 26A. The ITO granted registration to the firm and completed the assessment on that basis. The Commissioner of Income-tax, in exercise of his power under section 33B, however, held that the application for registration which was received by the ITO was belated and that, in any case, the real partners were not the persons shown in the deed of partnership, and that one of the partners', was not a partner in his individual capacity but was only a representative of another firm in which he was a partner. He came to this conclusion in the light of two facts, (1) 'S' that firm had provided the share capital appearing in the name of 'S' in the firm and (2) the share of profits in the assessee-firm allotted to 'S' was divided between the partners of the other firm. The assessee's appeal to the Tribunal failed, as it found itself in substantial agreement with the Commissioner's conclusion. On reference : HELD It was argued for the assessee that even granting that the two facts relied on by the Commission for his conclusion had a factual basis, inasmuch as the assessee-firm had not been held to be a bogus one or one which had no legal existence, the mere fact that one of the partners brought the share capital from the funds of another firm and took back…

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