1997 (7) TMI 78 - HC - Income Tax

Tribunal grants registration continuation despite profit distribution concerns under Income Tax Act

Commissioner Of Income-Tax Versus KP. Gupta And Sons

Commissioner Of Income-Tax Versus KP. Gupta And Sons - [1998] 231 ITR 954, 95 TAXMANN 537 Issues:Claim for continuation of registration for the asst. yr. 1974-75.Analysis:The case involved a dispute regarding the continuation of registration for an assessee-firm for the assessment year 1974-75. The Income Tax Officer (ITO) refused to grant continuation of registration based on the observation that the profits of the firm had not been distributed in accordance with the partnership deed. The Appellate Assistant Commissioner (AAC) upheld the ITO's decision, emphasizing the absence of evidence showing actual distribution of profits among partners. However, the Tribunal overturned the lower authorities' decisions, noting that the firm had met the requirements for continuation of registration as per sub-s. (7) of s. 184 of the Income Tax Act, 1961.The Tribunal highlighted that the firm had not undergone any changes in its constitution or the partners' shares, as evidenced by the partnership deed on which the registration was granted for the preceding year. Additionally, the firm had submitted the required declaration for continuation of registration in the prescribed form. The Tribunal also cited the case law CIT vs. Voleti Veerabhadra Rao & Sons (1972) 84 ITR 764 (AP), which clarified that the failure to ascertain or distribute profits among partners was not a condition for the continuation of registration under s. 184(7) of the Act.Ultimately, the Tribunal concluded that the assessee had fulfilled the necessary conditions for the continuation of registration, and therefore, the Revenue authorities were wrong in denying the claim. Consequently, the question referred by the Revenue was answered in favor of the assessee, affirming their entitlement to the continuation of registration for the relevant assessment year.