Law:

Section:

Section 185 of the Income-tax Act, 1961 - Firm - Position prior to 1-4-1993 - Assessee-firm, a firm of ten partners, entered into a sub-partnership with others - Assessee-firm then applied for registration of firm which was rejected by Assessing Officer - Whether by entering into sub-partnership agreement, partners were trying to share their income from partnership with other partners - Held, yes - Whether where factum of sub-partnership had not been communicated to Assessing Officer even though each one of partners had knowledge about same as provided under clause (b) of Explanation to section 185, assessee-firm was not entitled to registration - Held, yes CASES REFERRED TO CIT v. Sivakasi Match Exporting Co. [1964] 53 ITR 204 (SC) [Para 2], CIT v. Sir Hukumchand Mannalal & Co. [1970] 78 ITR 18(SC) [Para 2], Murlidhar Himatsingka v. CIT [1966] 62 ITR 323 (SC) [Para 2], CIT v. Chander Bhan Harbhajan Lal [1966] 60 ITR 188 (SC) [Para 2], CIT v. Bagyalakshmi & Co. [1965] 55 ITR 660 (SC) [Para 2], CIT v. Palliveedu Traders [1993] 204 ITR 141/[1995]82 Taxman 462 (Ker.) [Para 3] and CIT v. Jayalakshmi Oil Firm [1997] 228 ITR 443/ 95 Taxman 108 (AP) [Para 3]. T. Ravikumar for the Applicant. ORDER K. Raviraja Pandian, J. - The question of law, on which we are called upon to answer the reference, is as follows : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the sub-partnership is a legally permissible device and by entering into sub-partnership, a partner will not become a benamidar of any other person and, therefore, the assessee-firm is entitled for registration ?" 2. The assessee-firm, a firm of ten partners, constituted under a partnership deed dated 9-2-1979, applied for registration under the Income-tax Act, 1961, for which it filed an application in Form No. 10. In the course of the assessment proceedings, the assessee brought to the notice of the Assessing Officer the fact that each of the partners had entered into a sub-partnership with others and consequently, the share of each partner of the income of the assessee-firm would have to be shared among the partners of the sub-partnership.…

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