Commissioner of Income Tax, Poona vs Nagappa Abdulpurkar

Desai, J.—The question referred to us u/s 66(1) of the Indian Income Tax Act, 1922, is as follows :

"Whether, on the facts and in the circumstances of the case, the assessee-firm was entitled to registration u/s 26A of the Income Tax Act, 1922"

In this reference we are concerned with the deed of partnership dated 1st September, 1959, annexure "A" to the statement of case, together with a deed of amendment called deed of agreement dated 30th October, 1959, annexure "B" to the statement of case. On the basis of these deeds the registration was claimed for the firm. The Income Tax officer refused registration as according to him the deeds did not bring about any relation of partners among the parties to the deeds and there was no intention to act upon the terms of the same. The Appellate Assistant Commissioner upheld the decision of the Income Tax Officer. The assessee then took up the matter in appeal to the Tribunal. The Tribunal considered the circumstances under which the partnership was formed. It applied its mind to the factors which had weighted with the Income Tax Officer and the Appellate Assistant Commissioner in their conclusions. It considered the decision of the Madhya Pradesh High Court in the case of MURLIDHAR KISHANGOPAL Vs. COMMISSIONER OF Income Tax, M. P., NAGPUR AND BHANDARA., and applying the principles enunciated therein, the Tribunal held that, on the facts and circumstances of the case, there was a valid partnership formed expressly in the manner it has been done in consonance with the provisions of the Indian Partnership Act, 1932, and further that the said partnership was a genuine one.

In view of the conclusions of the Tribunal that the partnership was both valid and genuine, it appears that the question would be required to be answered in the affirmative and in favour of the assessee. Mr. Joshi has very fairly pointed out that this would be so by reason of the decision of our High Court in R.K. Dhingra and Co. Vs. Commissioner of Income Tax, Bombay City-III, . In view of the clear finding as to genuiness given by the Tribunal and since in our opinion there was no legal bar to formation of such partnership, the question will be required to be answered in favour of the assessee. Such a firm cannot be denied registration u/s 26A merely because there would be some loss of revenue.

In the result, the question referred to us is answered in the affirmative and in favour of the assessee. The parties, however, will bear their own costs of the reference.