METHARAM LEKHUMAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961 ("the Act"), at the instance of the assessee for the decision by this court of the following questions of law, namely :

(2.) WHETHER, on the facts and in the circumstances of the case, the Tribunal was justified in holding that shares in losses were not specified in the partnership deed dated October 30, 1971 ?"

(3.) THE real question for our decision is whether the Supreme Court decision in Mandyala Govindu & Co.'s case [1976] 102 ITR 1 concludes the point for decision before us. THE point is whether the non-specification of shares in the losses of the firm in the instrument of partnership justifies refusal of registration of the firm under Section 185. Admittedly, the partnership of the assessee-firm is evidenced in the present case by the partnership deed dated October 30, 1971, on the basis of which the assessee-firm claimed registration under Section 185. THE partnership deed shows that it is comprised of four adult partners, namely, Nevandram, Dhanomal, Kishanchand and Choithram and a minor, Sunderdas, has been admitted only to the benefits of the partnership. Choithram and a minor, Sunderdas, are the sons of Dhanomal, while Nevandram is the brother of Dhanomal. THE shares are indicated in the deed as 25 paise each of Nevandram, Dhanomal and Kishanchand ; 15 paise for Choithram and remaining 10 paise for minor, Sunderdas. THEse are shares obviously in the profits of the firm, even though the word "profit" is not expressly mentioned. This is obvious from the fact that the minor has been expressly admitted only to the benefits of the partnership and even otherwise the minor could not be made liable for the losses. THEre is nothing else in the partnership deed relating to the shares of the partners and there is no mention of the losses and the manner in which they were to be shared by the adult partners. In other words, the partnership deed is totally silent about the sharing of losses and there is nothing to indicate that it was even considered, much less decided while entering into partnership and drawing up the partnership deed to evidence the contract of partnership. THE question arising for decision has, therefore, to be decided on these facts.