COMMISSIONER OF INCOME TAX Vs. RAJMOHAN SAHA

JUDGEMENT

(1.) THIS reference under Section 256(1) of the Income-tax Act, 1961, has been made by the Income-tax Appellate Tribunal, Gauhati Bench, Gauhati, at the instance of the Commissioner of Income-tax and the following question of law has been referred for our opinion :

(2.) THE assessee is a partnership firm. It was constituted by a deed of partnership dated May 1, 1972. It comprised three partners, namely, Rajmohan Saha, Akhil Chandra Saha and Meghanand Saha. THE firm, as evidenced by the said partnership deed, was registered by the Income-tax Officer, A-Ward, Tripura Circle, Agartala, under the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the assessment year 1973-74. THE benefit of continuation of registration was also granted for the assessment years 1974-75 and 1975-76. During the assessment year 1976-77, there was a change in the constitution of the firm. One of the partners, Shri Akhil Chandra Saha, retired and, in his place, Shri Gautam Chandra Saha was taken as a partner. This change was made by an agreement dated April 15, 1975. THE said agreement was executed between the continuing partners, Rajmohan Saha and Meghanand Saha, and the incoming partner, Gautam Chandra Saha. In Clause (2) of the agreement, it was stated that the said agreement and several clauses of the partnership deed dated May 1, 1972, except Clauses (3), (4), (5) and (6) which were modified by the said agreement shall bind and regulate the relationship of the parties. As the aforesaid change amounted to a change in the constitution of the firm, an application was submitted for registration in Form No. 11A as required by Section 184(8) of the Act and the rules framed thereunder. THE application was accompanied by an attested copy of the agreement dated April 15, 1975. THE original deed of partnership dated May 1, 1972, was already lying in the office of the Income-tax Officer. THE Income-tax Officer, however, refused to register the firm as, in his opinion, since no fresh deed of partnership had been executed, the agreement dated April 15, 1975, could not be considered a valid partnership. On appeal, the Appellate Assistant Commissioner did not agree with the opinion of the Income-tax Officer and held that the original partnership continued subject to the change effected by the subsequent agreement. He, accordingly, directed the Income-tax Officer to allow registration to the firm. THE Revenue went on appeal before the Tribunal against the order of the Appellate Assistant Commissioner. THE Tribunal upheld the decision of the Appellate Assistant Commissioner and rejected the appeal of the Revenue. It was held by the Tribunal that the change could be effected by an agreement between the partners without undergoing the formality of executing a fresh partnership deed. It was, therefore, held that the application in Form No. 11A was competent and that the firm was entitled to registration. Aggrieved by the decision of the Tribunal, the Revenue applied to the Tribunal under Section 256(1) of the Act for reference of the question of law referred to above to this court. THE application was allowed by the Tribunal and the present reference was made.

(3.) SECTION 185 deals with the power of the Income-tax Officer to grant or refuse registration. It provides that, if the Income-tax Officer is satisfied that there is or was a genuine firm in existence, constituted as shown in the instrument of partnership, he shall register the firm. Registration once granted under SECTION 185 continues to have effect under SECTION 184(7) for every subsequent year if there is no change in the constitution of the firm or in the shares of the partners, on the furnishing of a declaration by the firm in the prescribed form within the prescribed time.