CIT Vs. SAREE SANSAR

JUDGEMENT

(1.) THE Income Tax Appellate Tribunal has referred the following question of law under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') for opinion of this court. 'Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in directing the Income Tax Officer to grant registration to the assessee firm for the period falling after 7 -4 -1978

(2.) BRIEFLY stated, the facts giving rise to the present reference are as follows : - The partnership firm with the name of Saree Sansar (Modern) was constituted by two partners namely Shri Rajesh Chandra Gupta and Shri Sanjay Kumar Gupta by a partnership deed which was executed on 7 -4 -1978. The partnership deed, however, provided that the firm will be deemed to have come into force with effect from 21 -10 -1977. The profits and losses of the firm were to be divided in proportion of 60% and 40%. The Income Tax Officer found that Shri Sanjay Kumar Gupta was minor on 21 -10 -1977 and on that date he could not have entered into a partnership with Rajesh Chandra Gupta. However, on the date of the execution of partnership deed both the partners were major as Sanjay Kumar Gupta had become major on 20 -2 -1978. The Income Tax Officer held that there could be no partnership with Sanjay Kumar Gupta and Rajesh Chandra Gupta with effect from 21 -10 -1977 as one of them was minor on that date. He declined to register the firm. When the matter came before the Appellate Assistant CIThe held that the partnership deed was valid as it was entered into by two major persons. He directed the Income Tax Officer to register the firm.

(3.) IT is not in dispute that the partnership deed was executed on 17 -4 -1978 when both the parties to the deed with majors. Thus, the parties were competent to enter partnership on that date. The partnership deed has rightly been confined with effect from 17 -4 -1978 and the firm has been directed to be granted registration. There is no illegality in the order of the Tribunal.