GUMTHANNAVAR R N Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference made by the Tribunal, Bombay Bench "A", under s. 66(1) of the IT Act, 1922, has for its source an order made by the ITO under s. 26A of the Act refusing registration of the assessee-firm for the asst. yr. 1961-62.

(2.) THE firm, it was said, consisted of three partners and was constituted under the instrument of partnership executed on 27th Nov., 1959. Under the partnership deed, they were entitled to share the profits and bear the losses in the proportion of 50 : 37 : 13. THE ITO, who himself had accepted the status of the assessee as a partnership firm by the application of the provisions of s. 23(5)(b) and allocated the profits amongst the partners in proportion to the shares specified in the deed of partnership, thought that cls. 6 and 9 of the partnership deed contained covenants which impel the view that there was no partnership in the eye of law. THE AAC, however, dissented from that view and directed the ITO to register the firm. But that order made by him was reversed by the Tribunal which concurred in the view taken by the ITO. THE question of law referred to us reads :

(3.) THE question formulated by the Tribunal is not very appropriately worded. What we are asked to decide is whether the firm constituted under the partnership deed dt. 27th Nov., 1959, was registrable under s. 26A of the IT Act, 1922. If the firm is a genuine firm--and none stated it was not--and it came into being during the previous year to which the assessment relates and an application was made for registration in accordance with law, it is indisputable that its registration cannot be refused. It appears from the question referred to us that the question assumes that the assessee was a firm and that it was constituted under the partnership deed to which the question refers. Since the partnership, if any, constituted under that instrument of partnership came into being during that relevant period and the application was not found defective for any reason, if we should understand the reference made to us too literally, there should be no difficulty in our deciding it in favour of the assessee. But we have no doubt in our mind that the real question referred to us is whether, having 73 regard to cls. 6 and 9 of the instrument of partnership, the assessee is a firm and was registrable under s. 26A.