PROGRESSIVE FINANCERS PROGRESSIVE FINANCERS Vs. COMMISSIONER OF INCOME TAX MADRAS:ADDITIONAL COMMISSIONER OF INCOME TAX MADRAS 1 MADRAS

JUDGEMENT

(1.) THE appellant in these three appeals is M/s. Progressive Financers, a partnership firm. It came into existence with execution of a partnership deed on 1-7-67. It consisted of five partners. Out of them Sunitha Pratap was a minor and, therefore, she was admitted to benefits of partnership. THE capital of the partnership was fixed at Rs. 5 lacs and each partner had to contribute as follows : <FRM>JUDGEMENT_79_3_1997Html1.htm</FRM>

(2.) FOR the assessment year 1967-68 it applied for registration to the Income-tax Officer (for short the 'ITO') under Section 184 of the Income-tax Act, 1961 (for short the 'Act') on 31-3-68. FOR the assessment years 1969-70 and 1970-71 it applied for renewal of registration. The ITO rejected the application for registration on 30-6-71. On the same day, he passed an assessment order for the assessment year 1968-69 treating the status of the appellant as Association of Persons. Applications for renewal of registration for the assessment years 1969-70 and 1970-71 were rejected on 13-3-72 and the assessment orders for those years were again passed treating the appellant as Association of Persons.

(3.) CONSTRUING the partnership deed in the light of the decisions of this Court in Commr. of Income-tax, Mysore v. Shah Mohandas Sadhuram, 57 ITR 415 : ( AIR 1966 SC 15) and Commr. of Income-tax, Mysore v. Shah Jethaji Phulchand, (1965) 57 ITR 588 and the decision of the Andhra Pradesh High Court in Addepally Nageswara Rao (supra) the Tribunal held that minor Sunitha was admitted merely to the benefits of partnership and it was not correct to say that she was made a fullfledged partner. The Tribunal also held that the minor was not to be burdened with losses and they were to be borne by the other partners. It further held that though the instrument of partnership did not specifically provide how the losses were to be borne by the partners the rule that in such cases losses are to be shared in the same proportion as profits became applicable and since the partnership deed was capable of being construed in that manner, the firm was entitled to registration. It, therefore, dismissed the appeal.