COMMISSIONER OF INCOME TAX Vs. ITHAPPIRI AND GEORGE

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act 1961, at the instance of the department. The assessee is a firm. The year of assessment is 1965-66, the corresponding accounting period being that ended on March 31, 1965. The question referred is :

(2.) DURING the accounting period a partnership deed was entered into by the assessee-firm on March 22, 1965. The partnership deed is annexure "A". The relevant paragraph of the partnership deed for the purpose of this case is paragraph 6, which is in these terms :

(3.) THE firm applied in the prescribed form for registration of the firm for the assessment year 1965-66. This application was refused by the Income-tax Officer on the ground that the instrument did not specify the individual shares of the partners in relation to the losses that the firm may sustain. In appeal, however, the Appellate Assistant Commissioner reversed the decision of the Income-tax Officer relying on Section 4 of the Indian Partnership Act, 1932. THEre was a further appeal before the Tribunal and the decision of the Gujarat High Court in Thacker & Co. v. Commissioner of Income-tax, 1966 61 ITR 540 was relied on by counsel on behalf of the revenue in support of the contention that registration should be refused because the instrument of partnership did not satisfy the requirements of Section 184 of the Income-tax Act, 1961, in that the proportion in which the losses should be borne had not been stated in the instrument. THE Tribunal however decided against the revenue on the ground that the preponderance of authority on the subject is in favour of the assessee. It referred to the decisions of the Allahabad and Mysore High Courts in Hiralal Jagannath Prasad v. Commissioner of Income-tax, 1967 66 ITR 293 All. and in R. Sannappa and Sons v. Commissioner of Income-tax, 1967 66 ITR 27 Mys..