Punjab And Haryana H.C : The assessee-firm was entitled to registration under s. 185(1)(a) of the IT Act, 1961 for the asst. yr. 1973-74

High Court Of Punjab And Haryana

CIT vs. Jain Steel Rolling Mills

Section 185

Asst. Year 1973-74

Gokal Chand Mital & S.S. Sodhi, JJ.

IT Ref. No. 89 of 1980

15th November, 1988

Counsel Appeared

Ashok Bhan & Ajay Mittal, for the Revenue : B.S. Gupta & Sanjay Bansal, for the Assessee


The Tribunal, Chandirh, has referred the following questions for the opinion of this Court for the asst. yr. 1973-74 :

“Whether the Tribunal has been in error in law in holding that the assessee-firm was entitled to registration under s. 185(1)(a) of the IT Act, 1961 for the asst. yr. 1973-74 ? “

2. It arises out of the following facts. A partnership deed was drawn up on July 20, 1972, but was brought into effect from June 1, 1972. An application for registration of the partnership was filed and when the matter was taken up by the ITO, he found that Sunil Kumar, one of the partners, had attained majority on June 13, 1972, and since the partnership was made effective from June 1, 1972, when he was a minor, he refused to grant registration. The assessee failed before the AAC but on further appeal to the Tribunal, it was held that the AAC was in error in confirming the ITO’s decision in not registering the partnership on the reasoning that a partnership deed can be given retrospective operation as between the parties to serve a limited purpose for dating the accounts of profits and losses.

3. On behalf of the Revenue, Addl. CIT vs. Uttam Kumar Pramod Kumar 1978 CTR (All) 313 (FB): (1978) 115 ITR 796 (Bom), a Full Bench judgment of the Allahabad High Court was cited, whereas, on behalf of the assessee, a decision of this Court in Jagadhri Electric Supply & Industrial Co. vs. CIT (1987) 166 ITR 143(P & H) and decisions of three other High Courts in CIT vs. P. M. Syed Mohammed Kannu & Co. (1984) 42 CTR (Ker) 238:(1984) 149 ITR 441 (Ker), Modern Stores vs. CIT (1985) 48 CTR (AP) 8:(1986) 157 ITR 589 (AP), CIT vs. Associate Industrial Distributors (1982) 138 ITR 304 (Cal) and Srinivasa Stainless Steel & Moulding Works vs. CIT (1987) 167 ITR 1 (AP) were cited. On consideration of the matter, we find that the case in hand is fully covered by a decision of this Court in Jagadhri Electric Supply’s case (supra), as the facts are identical. In the reported judgment, the partnership deed was executed on July 1, 1966, and it was made effective from April 1, 1966. One of the partners became major on June 3, 1966, that is, prior to the execution of the partnership deed, but after the date of making the partnership deed effective. The following rule was laid down (headnote) : “that C had become a major prior to the close of the financial year when the profit and loss account was finalised and he was a full fledged partner. Hence, it could not be said that the deed of partnership was not validly constituted.”

4. In the case in hand, the minor had attained majority during the counting year (previous year) and, therefore, could contract to share the profits and losses, even for a small period of 13 days during which he was minor. In Uttam Kumar’s case (supra), the facts were different. There, the minor had not attained majority during the accounting year and, therefore, it is clearly distinguishable. The facts being distinguishable, we need not go into the question whether the Calcutta and Andhra Pradesh High Courts were right in dissenting from the view of the Allahabad High Court. Since the matter is covered by a judgment of this Court in favour of the assessee and against the Revenue, following that decision, we answer the question in the negative to the effect that the Tribunal did not err in holding that the assessee was entitled to registration for the asst. yr. 1973-74. However, there will be no order as to costs.

[Citation : 177 ITR 498]

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