OUSEPH Vs. DY COMMR OF AGRL INCOMETAX

JUDGEMENT

(1.) THESE two references, by the Deputy Commissioner of agricultural Income-tax and Sales Tax, North Zone, Kozhikode, are in respect of the same assessee for two different assessment years 1968-69 and 1969-70. The questions of law referred for our determination are: (1) Whether, on the fads and in the circumstances of the case the Deputy Commissioner was correct on holding that the firm was not entitled, for the registration under S. 27 of the Agricultural Income-tax Act, 1950; and (2) Whether, on the facts and in the circumstances of the case the Deputy Commissioner was competent to exercise his suo motu powers of revision to set aside the finding of the officer that the requirements of S. 27 have been satisfied by the Applicant. The assessee applied for registration of a firm constituted by the deed of partnership dated 15 91966. The accounting period for the year during which the partner-ship was constituted was to run out on 30 6196. The registration was applied for under S. 27 of the Agricultural income-tax Act, 1950, which reads as follows: "27. Procedure in registration of firms. (1) Application may be made to the Agricultural income-tax Officer on behalf of any firm, constituted under an instrument of partnership specifying the individual shares of the partners, for registration for the purposes of this Act and of any other enactment for the time being in force relating to agricultural income tax or supertax. (2) The application shall be made by such person or persons and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed, and it shall be dealt with by the Agricultural Income-tax Officer in such manner as may be prescribed. " The rules providing for particulars of the application and the manner of dealing with it are R. 2,3 and 4 of the Agricultural income-tax Rules, 1951 R. 2 of the Rules, in so far as that is material, reads: "2. Any firm constituted under an Instrument of partnership specifying the individual shares of the partners may, under the provisions of S. 27 of the Agricultural Incometax Act, 1950 (hereinafter in these rules referred to as the Act) register with the Agricultural Income-tax officer the particulars contained in the said Instrument on application made in this behalf. (rest omitted ).

(2.) IN the light of the above provisions, registration of the firm was allowed by the Agricultural Income-tax Officer. The Deputy commissioner of Agricultural Income-tax, in exercise of bis suo motu powers of revision, under S. 34 of the Act, disallowed registration of the firm on two grounds: (1) that no accounts had been kept by the firm; and (2) that the share of the profits shown in the application for registration did not correspond to the state of affairs disclosed by the partnership deed.

(3.) IN regard to the second ground given by the Deputy commissioner, we have been taken carefully and elaborately through the provisions of the Act and the Rules. We have also been taken through the provisions of the deed of partnership, a copy of which is Appendix 3 of the statement of the case. Clause. 4 and 6 of the deed are as follows: "4. The Capital of the Partnership shall be Rs. 1,00,000.00 (Rupees one lakh) of which the amounts as shown below shall be contributed by each of the parties hereto within two weeks of the execution of this Deed Table:#1 The balance shall be contributed by each of the parties as and when the business of the Partnership wants the same which shall not be earlier than one year after the execution of this Deed and such sums shall be contributed in the proportion to the initial contribution as aforesaid. If at the time of calling for the balance capital any of the parties hereto is unable or be unwilling to contribute the same the other parties or any of them may contribute such sums over and above his share for such contribution. No interest shall be payable on the amounts contributed towards the Capital of the partnership. xx xx xx xx 6. The profits and losses of the Partnership business shall be divided and borne between each of the Partners in the proportion in which each of the Partners have contributed towards the capital of the partnership, provided that future contributions other than the initial contribution towards the capital shall not be counted for division of profits or losses unless such contributions be made at least three months prior to the close of the accounting year of the Partnership" In the application for registration, the division of profits as between the partners who had contributed initial capital as shown in clause (4) was shown thus: 41. 67%; 33. 34%; 8. 33%; 8. 33%; and 8. 33%. The complaint of the Deputy Commissioner was that, worked out with reference to the ratio of the initial capital contributions, the percentage should have been 40 %; 36 %; 8 %; 8 % and 8 %. In this view, the Deputy Commissioner was of the opinion that, the distribution of profits shown in the application for registration was not in accordance with the terms of the partnership deed.