CHALLA APPALASWAMY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee-firm, the Income-tax Appellate Tribunal, Hyderabad Bench, has referred the following question of law for our opinion :

(2.) THE material facts leading to this reference may briefly be stated :

(3.) THE learned counsel appearing for the assessee, Sri Anjaneyulu, on the strength of the decisions in Commissioner of Income-tax v. Sivakasi Match Exporting Co., . and S. C. Prashar v. Vasanlsen Dwarkadas, . contended that words "regardless of such losses" occurring in Clause 6 of the instrument of partnership mean that the partners who admitted the minor to the benefits of the partnership had agreed that even the assets of the minor should not be made liable for losses. Such an agreement could be lawfully entered into by the partners and thence the manner in which the profits and losse were divided by the partners was in accordance with the shares specified in the instrument of partnership and the Income-tax authorities and the Tribunal were not justified in refusing registration for the assessee-firm. It was further contended that in case the Income-tax Officer found that a registered firm had not divided its profits in accordance with the respective shares of the partners he could in the exercise of powers vested in him impose a penalty under Section 28 of the Indian Income-tax Act, 1922, but could not in any case refuse or cancel registration.