COMMISSIONER OF INCOME TAX Vs. CHAKKIATH BANKERS

JUDGEMENT

(1.) The following questions of law are referred for decision by this Court pursuant to the directions issued by this Court in the judgment dated 9.3.1998 in O.P. No. 15726 of 1997 at the instance of the revenue:

(2.) The respondent assessee is a partnership firm with more than 10 partners but less than 20 engaged, inter alia, in 'banking' business. This firm was originally constituted as per a partnership deed dated 16.4.1975 and the firm was granted registration under the Act upto the assessment year 1980-81. However, when the assessee had made an application in form 11A after reconstitution of the firm the assessing authority refused to grant registration on the ground that the assessee is engaged in banking business and, therefore, it is hit by the provisions of S.11 of the Companies Act. This view of the assessing officer was affirmed in appeal by the Commissioner of Income Tax (Appeals). However, the Tribunal in further appeal by the assessee cancelled the order of the two authorities and held that the assessee is entitled to registration.

(3.) Shri. George K.George, standing counsel for the revenue submits that the assessee firm is admittedly having more than 10 partners and as per partnership deed itself the business of the assessee, inter alia, is banking business. The standing counsel further submitted that since the number of partners exceeded 11 and since the partnership firm is engaged in banking business, S.11(1) of the Companies Act squarely attracted which provides that a partnership firm which has more than 10 partners is not entitled to carry on banking business unless it is registered under the Companies Act. The standing counsel accordingly submitted that the Tribunal had decided the question erroneously.