Doshi Vastralaya vs Commissioner of Income Tax

G.G. Sohani, Actg. C.J.

This is an application u/s 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act").

The material facts giving rise to this application, briefly, are as follows :

For the assessment year 1979-80, the assessee, which is a partnership firm, submitted an application for registration of the firm under the provisions of the Act. The Income Tax Officer found from the account books of the assessee that profits had not been distributed between the two partners in accordance with the provisions of the partnership deed. The Income Tax Officer, therefore, refused registration. On appeal, the order passed by the Income Tax Officer was affirmed. On further appeal, the Tribunal held that the assessee-firm was not genuine as the profits of the assessee-firm were not divided in accordance with the terms of the partnership deed. In this view of the matter, the Tribunal dismissed the appeal. Aggrieved by the order passed by the Tribunal, the assessee submitted an application for making a reference but as the application submitted by the assessee in that behalf was rejected, the assessee has filed this application.

Having heard learned counsel for the parties, we have come to the conclusion that the following question of law does arise out of the order passed by the Tribunal:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was not a genuine partnership firm because the profits of the assessee-firm had not been distributed in accordance with the terms of the partnership deed ?"

The application is, therefore, allowed. The Tribunal is directed to state the case and to refer the aforesaid question of law to this court for its opinion. In the circumstances of the case, parties shall bear their own costs of this application.