RAM NARAIN LAXMAN PRASAD Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner is a partnership firm carrying on business under the name and style of M/s. Ram Narain Laxman Prasad at Lucknow. It came into existence under a partnership deed dated April 20, 1964. According to the partnership deed, there were two partners, Laxman Prasad and Vinod Kumar. Two minors, Ram Mohan and Rajendra Prasad, were admitted to the benefits of partnership. Clause (2) of the partnership deed recited that on the minors' attaining majority they would automatically become full fledged partners, the existing deed would hold good and no fresh deed would be required to be executed.

(2.) SHORTLY after coming into existence the petitioner firm was granted registration under Section 185 of the Income-tax Act, 1961, and the benefit of registration was continued, thereafter, under Section 184(7) up to the assessment year 1966-67. For the assessment year 1967-68, a declaration in Form XII was filed by the petitioner-firm. It was a declaration made under Section 184(7) affirming that the firm had been granted registration and that there had been no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted. Ram Mohan, one of the minors admitted to the benefits of partnership, had attained majority on June 24, 1966, during the previous year, relevant to the assessment year 1967-68, and the declaration in Form XII was signed by him also. Admittedly, on Ram Mohan attaining majority, no fresh partnership deed was executed. It is stated that he did not elect not to become a partner in the firm and that there was no change in the shares of the partners in the profits or losses of the business.

(3.) AT the very outset, learned counsel for the petitioner-firm assails the validity of the view taken by the revenue authorities that on Ram Mohan attaining majority there was a change in the constitution of the firm. It is urged that under the Income-tax Act a minor has been treated as a partner, and continues as such on his attaining majority and, therefore, it cannot be said that the constitution of the firm undergoes any change. It is also pointed out that the decision in Ganesh Lal Laxmi Narain was rendered in a case under Section 26A of the Indian Income-tax Act, 1922, and was not attracted in the present case which falls under Section 184 of the Income-tax Act, 1961. Alternatively, it is urged that the decision in that case calls for re-consideration, and we have been referred to a circular said to have been issued by the Central Board of Direct Taxes doubting the correctness of that decision. Our attention has also been invited to Section 187(2) which declares that there is a change in the constitution of the firm if one or more new partners are admitted, and, it is said, that as Ram Mohan is not a new partner admitted in the firm there is no change in the constitution of the firm.