High Court Of Madhya Pradesh : Indore Bench
CIT vs. Oriental Trading Corporation
Asst. Year 1980-81
A.M. Sapre & Ashok Kumar Tiwari, JJ.
IT Ref. No. 27 of 1997
21st June, 2004
R.L. Jain, for the Appellant : B.K. Joshi, for the Respondent
A.M. sapre, J. :
This is a reference made at the instance of Revenue (CIT) under s. 256(1) of the IT Act to this Court for answering the following question of law : “Whether, on the facts and in the circumstances of the case, the assessee was entitled for registration ?”
The respondent is an assessee. It is a firm. The assessee for the asst. yr. 1980-81, made an application for registration of their firm as contemplated under s. 185 of the IT Act on the strength of deed of partnership dt. 5th July, 1979. For the earlier assessment year the constitution of the firm was different than the one applied for. In the year in question, two individual persons were representing their respective HUFs, which was not in earlier years. Some partners who were in the last year had retired. This, in fact, was the change in the constitution of earlier yearâs partnership and that of the year in question. The AO refused to grant registration to the firm saying that assessee failed to prove capital investment made by all partners. The CIT(A) and Tribunal while setting aside of the view taken by AO granted registration to the assessee. It was held that since the deed of partnership is evidenced in writing and secondly, most of the partners have actually contributed to the firm, the ITO should have granted registration to the assessee. It is this question, which is referred to this Court at the instance of Revenue. Heard Shri R.L. Jain, learned counsel for the applicant, and Shri B.K. Joshi, learned counsel for non-applicant.
Having heard learned counsel for the parties and having perused the statement of case, we are inclined to answer the question against the Revenue and in favour of assessee.
In our opinion, no fault can be found in the reasoning assigned by CIT(A) and Tribunal while granting registration to the assessee for the year in question (1980-81). It is not in dispute that the partnership is evidenced in writing (deed dt. 5th July, 1979). It is also not in dispute that the partners had contributed to the firm by making capital investment. It is further not in dispute that in earlier years also the constitution of firm was being accepted by the AO. All these factors clearly show that the firm in question was a genuine one and was thus, entitled to claim registration under s. 185 of the Act. As rightly observed by the Tribunal, the AO could not have refused registration only on the ground that one of the partners failed to show capital contribution. One cannot dispute the legal proposition that an HUF can become a partner through its Karta. In the present case, the members of family had the nucleus and were in a position to constitute their HUF.
6. We, therefore, do not find any merit in the submission of learned counsel for the Revenue. Accordingly and in view of aforesaid discussion, we answer the question against the Revenue and in favour of assessee. No costs.
[Citation : 270 ITR 564]