COMMISSIONER OF INCOME TAX Vs. INDIAN TIMBER TRADERS

JUDGEMENT

(1.) AT the instance of the Revenue, the Income -tax Appellate Tribunal has referred the following two questions of law for the decision of this court :

(2.) THE respondent is an assessee to income -tax. We are concerned with the assessment year 1976 -77. The respondent -firm was originally constituted by seven partners. It was constituted by a deed dated February 26, 1974. A new deed of partnership was executed on August 25, 1975 between four persons. Out of the original seven partners, four expressed their desire to retire from the firm with effect form April 1, 1975. The three others continued. They agreed to take one M. A. Mayankutty as a partner. A partnership was entered into between the three partners, who were the original partners, and Sri. Mayankutty by deed dated August 25, 1975. Registration was claimed for the firm on the basis of this deed. The Income -tax Officer noticed that as per clause 2 of the deed, the reconstituted partnership should be deemed to have come into force with effect from April 1, 1975, and on that day Mayankutty was only a minor. So, he took the view that Mayankutty could not be a partner on April 1, 1975, and so the firm was not entitled to registration for the year 1976 -77.

(3.) WE heard counsel. We concur with the Income -tax Appellate Tribunal in holding that Mayankutty became a partner only on August 25, 1975, on the date when the deed was entered into. All that clause 2 of the deed provided was that the firm is to take accounts back to the date, April 1, 1975. It only means that for taking accounts, the transactions from April 1, 1975, should be looked into. This is permissible in view of the decision in Wadingtons case [1931] 16 TC 187 and as held by the Jammu and Kashmir High Court in CIT v. Ghulam Ahmad Khan and bros. . In the light of the above, we are of the view that the Appellate Tribunal was justified in holding that the respondent/assessee -firm is entitled to registration. We answer question No. 1, referred to us, in the affirmative, in favour of the assessee and against the Revenue.