Law:

Section:

Section 184 of the Income-tax Act, 1961 [Corresponding to section 26A of Indian Income-tax Act, 1922], read with section 4 of Indian Companies Act, 1913 - Firm - Position prior to 1-4-1993 - Assessment years 1954-55 to 1958-59 - There was provision in partnership deed of assessee-firm for taking new partners into firm in case of death or retirement of any partner - For assessment years in question, assessee-firm applied for renewal of registration - ITO as well as AAC taking a view that some partners entered into partnership on behalf of their HUFs and as a result number of partners exceeded 20, refused renewal of registration holding that there was infringement of section 4 of Indian Companies Act, 1913 - Tribunal, however, allowed assessee's claim - Whether since on face of documents it was clear that partners entered into partnership in their individual capacity and at no time number of partners exceeded 20, Tribunal was right in directing registration of assessee-firm - Held, yes FACTS The assessee-firm was originally constituted in the year 1939 with 13 partners. There was a provision in the partnership deed for taking new partners into the firm in case of death or retirement of any partner. The firm was granted registration for the assessment year 1940-41. Registration was renewed from year to year up to the assessment year 1952-53. Owing to a change in the constitution of the firm, the partners drew up a fresh deed of partnership on 20-12-1952. The firm succeeded in having registration renewed for the assessment year 1953-54 also. Fresh deeds of partnership were drawn up in the years 1955, 1956 and 1957. The firm applied for registration for the five assessment years from 1954-55 to 1958-59. Renewal was refused by the ITO for all these assessment years on the ground that the number of partners exceeded 20, and the constitution of the firm was illegal in view of the provision contained in section 4 of the Indian Companies Act, 1913. That decision was upheld in appeal by the AAC. On second appeal, the Tribunal, however, allowed registration. On reference : HELD It might be that some of the persons shared their profits with members of their families. But…

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