P P KURIAKOSE; P P VARGHESE Vs. CIT

JUDGEMENT

(1.) THIS is a reference made by the Income-tax Appellate tribunal, Madras Bench under S. 66 (2) of the Indian Income tax Act, 1922 as directed by this Court on the application of the assessee. The question referred is: "whether on the facts and in the circumstances of the case, the assesses firm is entitled to renewal of registration under S. 26a of the Indian income-tax Act, 1922

(2.) THIS reference relates to the assessment year 1959-60: and the previous year is the one which ended or 31-12-1133 M. E. The assessee is a partnership firm consisting of two partners P. P. Kuriakose and P. P, varghese constituted under a deed dated 7-3-1953. It carries on business in provisions, rice and handloom goods. It was also conducting a wholesale ration shop for which the license was in the name of Kuriakose, and a retail ration shop for which the license was in the name of Varghese. During the accounting year 1133 M. E. the profits from its business excluding the ration shop amounted to Rs. 9,548/ -. THIS amount was credited equally in the names of the two partners in the books of accounts of the firm, there was a profit of Rs. 2,182 in the wholesale ration shop; and this was credited in the name of kuriakose. The profit in the retail shop was Rs. 803/-and this was credited in the name of Varghese. In accordance with the terms of the deed of partnership, the total profits from these ration shops should also have been equally divided and the, share of each partner should have been credited in his name.

(3.) THE same view was taken by the Bombay High Court in chhotalal Devachand v. Commissioner of Income-tax (1958) 34 I. T. R. 351,reference was also made by the assessee's learned counsel to a decision of this Court in st. Joseph's Provisions Stores v. Commissioner of Income-tax (1962) 45 I. T. R. 380. In that case, renewal of registration was refused by the Appellate Tribunal on the ground that the firm did not divide and credit its profits to the partners in accordance with the deed of partnership; but the profits were kept as a reserve. THE assessee contended that this was not a valid ground for refusing the renewal of the firm's registration. THE contention was upheld by this court; and is doing so, this Court quoted with approval the following passage from the judgment of Chagla C. J. , in Chhotalal Devachand's case. "now in the application for registration the shares of the partners are set out; but what is urged against the assessee is that in its books of account it has credited the profits to the firm name and not to the name of each constituent of the firm. Now if the shares of the partners are known-and for the purpose of this argument we will assume that the shares are known-then it is merely a matter of arithmetical computation. "