Law:

Section:

Section 184 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 1959-60 - Assessee-firm consisted of six partners and one minor was admitted to benefits of partnership - Partnership deed specified one seventh share of business profits of each partner and in losses partners were liable to extent of their respective share in profits - Since minor was not made party to loss, partnership deed did not specify what was to happen to balance of 1/7th loss - ITO, thus, refused renewal of registration of firm on ground that there was no proper allocation of loss in deed - Tribunal upheld ITO's order - Whether merely because share of losses is not specified will not make deed invalid so as to prevent its being registered and much less if share of losses has not been meticulously specified - Held, yes - Whether, therefore, assessee-firm was entitled to renewal of registration - Held, yes FACTS A HUF was carrying on the business of kiryana and money lending. A partial partition of the family took place and the erstwhile members of HUF entered into a partnership to carry on the business of the firm. The firm was comprised of six major partners and one minor was admitted to benefits of partnership. The partnership deed specified one-seventh share of business profit of each partner and in respect of losses the partners were liable to extent of their respective shares. Since minor was not made party to loss, the partnership deed did not specify what was to happen to the balance of 1/7th of the loss. The ITO refused renewal of registration to the firm on the ground that the partnership deed did not specify the allocation of 1/7th share of the loss. On appeal, the AAC confirmed the order of the ITO. On second appeal, the Tribunal confirmed the order of the AAC. On reference : HELD Section 26A of the 1922 Act requires an application to be made in the prescribed form to the ITO for registration on behalf of any firm which has been constituted under an instrument of partnership specifying therein the shares of the partners. Under sub-section (2) of section 26A of he 1922 Act, the…

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