Law: Income Tax Act, 1922

Section: 26A

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 1958-59 - Whether various clauses of partnership deed should be read in context of specific statement in deed that minors where only admitted to benefits of partnership - Held, yes - Whether were assessee partnership deed provided that minors mere admitted only to benefits of partnership and not to full partnership, assessee-firm would be entitled to renewal of registration as a firm under section 26A of 1922 Act - Held, yes FACTS The assessee-firm was consisted of 11 partners out of which 9 were minors. For the assessment year 1958-59, the assessee applied for renewal of registration: which was refused by the ITO. The order of the ITO was confirmed by the AAC. On second appeal the Tribunal found that the minors had been included in the deed as contracting partners executing it through the pen of their respective fathers and they had been made full fledged partners with the only reservation that they were not to shares the losses. The appeal was dismissed accordingly. On reference : HELD The various clauses in the partnership deed should be read in the context of the specific statement in the deed that the minors were only admitted to the benefits of the partnership; In the instant case on a proper interpretation of the deed it appeared that the minors were only admitted to the benefits of the partnership and not to full partnership. The assessee was therefore, entitled to renewal of registration as a firm under section 26A. Note : The case has been decided in favour of the assessee. CASES REFERRED TO CIT v. Dwarkadas Khetan & Co. [1961] 41 ITR 528 (SC), CIT v. Khetan & Co. [1962] 45 ITR 170 (Bom.), CIT v. Shah Jethaji Phulchand [1965] 57 ITR 588 (SC), CIT v. Shah Mohandas Sadhuram [1965] 57 ITR 415 (SC) and Jeewanram Gangaram v. CIT[1967] 64 ITR 483 (SC). JUDGMENT Banerjee, J.- This reference, under section 66(1) of the Indian Income-tax Act, 1922, has been made in the circumstances hereinafter related. The year of assessment, with which we are concerned, is 1958-59, the corresponding accounting…

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