Commissioner of Income Tax vs P.M.S. (Agencies)

K.K. Usha, J.—These references are at the instance of the Commissioner of Income Tax, Trivandrum. They arise out of Income Tax assessments for the assessment years 1980-81 and 1981-82. The assessee is a firm constituted by a deed of partnership dated November 1, 1973, with nine partners. The firm was granted registration till the assessment year 1979-80. But for the assessment years 1980-81 and 1981-82, the Income Tax Officer refused to continue registration on the ground that the partnership deed did not specify the share of losses to be borne by each partner and it contained only provisions relating to the share of profit. The Income Tax Officer took the above view in the light of the decisions of this court in C.T. Palu and Sons Vs. Commissioner of Income Tax, ; CIT v. Ithappiri and George [1973] 88 ITR 332 ; United Hardwares Vs. Commissioner of Income Tax, and Commissioner of Income Tax Vs. Best Automobiles, . On appeal by the assessee, the Commissioner of Income Tax (Appeals) took the view that once registration was granted continuation of the same could not be refused so long as the assessee had satisfied the requirements of filing a valid declaration u/s 184(7) of the Income Tax Act, 1961. On appeal by the Department, the Tribunal took the view that in the light of the ratio of the judgments of this court referred to above the original grant of registration was not proper. But once registration has been granted, the Income Tax Officer has only to see whether the declarations in Form No. 12 have been filed within the prescribed time satisfying all the requirements. Since such conditions are complied with, the Income Tax Officer acted in excess of his powers u/s 184(7) in declining to grant continuation of registration to the assessee-firm.

The following question was referred for the decision of this court :

"Whether, on the facts and in the circumstances of the case, and also in view of the finding that ''first registration .... .could not be granted to the assessee-firm'', the Tribunal is right in holding that the assessee is entitled to continuation of registration ?"

In view of the decision of a Full Bench of this court in Kerala Publicity Bureau Vs. Commissioner of Income Tax, , the dictum laid down in the earlier decisions relied on by the Income Tax Officer in coming to the conclusion that the original registration granted to the assessee-firm was wrong is no longer good law. The Full Bench has held that where no minor is admitted to the benefits of the partnership, a firm cannot be refused registration either u/s 27 of the Agricultural Income Tax Act, 1950, or u/s 184 of the Income Tax Act, 1961, only on the ground that the shares of the individual partners in the loss of the firm have not been specifically mentioned in the instrument of partnership. In the absence of indications to the contra it should be taken that the partners have agreed to bear the loss in the same proportion in which they are to share the profit. When shares of the individual partners are not actually worked out in the deed, it is open to ascertain the shares by reading the entire instrument as a whole and giving it a reasonable interpretation, by looking into the accounts and other documents of the firm which would show how the profit or loss had been actually apportioned between the partners and also by having recourse to Section 13(b) of the Indian Partnership Act, 1932. Sri P.K.R. Menon (Senior), learned standing counsel appearing for the Revenue, submits that since the original grant of registration to the assessee can no longer ,be treated as incorrect in the light of the dictum laid clown by the Full Bench of this court as referred to above, it is not necessary to go into the question now referred to this court.

In view of the above, we decline to answer the question referred.

A copy of this judgment under the seal of the High Court and the signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.