Equal profit-sharing upheld in firm constitution, entitling registration for assessment years.

The High Court held that there was no change in the constitution of the firm as the partners agreed to equal profit-sharing from the beginning, as per a supplementary deed, maintaining the original share ratios. Since the share ratios remained consistent, the firm was entitled to registration for the assessment years in question. The Court ruled in favor of the assessee, confirming registration for 1970-71 and continuation for 1971-72, directing the Tribunal to comply with its decision.

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Issues:
Whether there was a change in the constitution of the firm due to discrepancies in the partners' share ratios as per the partnership deed and the books of accounts, and if the firm was entitled to registration for the assessment years 1970-71 and 1971-72.

Analysis:
The case involved a partnership named M/s. Bansal Tel Bhandar, Bareilly, constituted by three partners under a partnership deed dated December 20, 1968, with specific share ratios. The firm applied for registration for the assessment year 1970-71, but the Income-tax Officer refused registration, citing discrepancies in the partners' share ratios in the books of accounts compared to the partnership deed.

Upon appeal, it was revealed that a supplementary partnership deed was executed on May 4, 1969, where all partners agreed to share profits equally from the beginning. The Appellate Assistant Commissioner set aside the Income-tax Officer's decision, directing a reconsideration. However, the Income-tax Officer, after further investigation, again refused registration, noting discrepancies in statements and the application form.

The matter proceeded to the Appellate Assistant Commissioner and then to the Appellate Tribunal, which found that there was no change in the constitution of the firm. The Tribunal concluded that the partners agreed to equal profit-sharing from the beginning, as per the supplementary deed, maintaining the original share ratios.

The High Court upheld the Tribunal's decision, emphasizing that since the share ratios remained consistent throughout, there was no change in the firm's constitution. The Court cited Section 187(2)(b) of the Income-tax Act, which states that a change in the constitution occurs when partners' shares are altered. As the original share ratios were maintained, the firm was deemed eligible for registration for the relevant assessment years.

In conclusion, the High Court ruled in favor of the assessee, confirming their entitlement to registration for the assessment year 1970-71 and continuation of registration for 1971-72. The Court answered the question posed by the Tribunal in the affirmative, against the Revenue, directing the Tribunal to act in accordance with the High Court's order.

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