Law:

Section:

Section 185 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 1960-61 - Whether where assessee firm exploited forest coupe contracts which were obtained from State Government in names of its individual partners and such exploitation was not prohibited by Forest Act, assessee was entitled to registration under section 26A of 1922 Act- Held, yes FACTS The assessee-firm carried on business as forest coupe contractors. The partnership was governed by a deed which provided inter alia for one or more of the partners taking contracts in their names and placing such contracts for the benefit of the firm. As a matter of fact, individual partners entered into coupe contracts with the State Government in respect of particular forests, and the same were, however, exploited by the firm on its account. The ITO declined to register the firm under section 26A of the 1922 Act on various grounds. But the AAC reversed the order, and the Tribunal concurred with him. At the stage of the Tribunal, only two grounds survived which the department pressed, (1) the partnership was formed with a view to work contracts taken in the names of individual partners and outsiders; and (2) the contracts were obtained through the process of rigging and knock-out bids, and were, therefore, opposed to public policy and so void. As to the second ground, the Tribunal, after scrutinizing the evidence, could not discover any proof of the existence of any activity like rigging and knock-out syndicates. The Tribunal, therefore, rejected this ground. It declined to accept the other ground as well, on the view that there was nothing in the Forest Act which prohibited exploitation by the firm of coupe contracts obtained in the names of one or more of the partners. On reference: HELD The Court had examined the provisions of the Forest Act and satisfied that exploitation by a firm of coupe contracts taken from the Government by the individual partners was nowhere prohibited and was not illegal. The right to exploit the forest, in these references, flowed from the contracts entered into as between individual…

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