1958 (3) TMI 90 - HC - Income Tax

Rectification after accounting year does not enable registration under section 26A for assessment year 1955-56.

The High Court held that the rectification made after the relevant accounting year did not enable the assessee firm to claim registration under section ... - Issues:Entitlement to registration under section 26A of the Income-tax Act for the assessment year 1955-56.Analysis:The judgment pertains to an assessee firm comprising six partners, with a deed of partnership dated March 29, 1954, coming into effect from April 1, 1954. The deed omitted a specific provision for profit division based on capital contributions. The partners later executed a supplemental document on September 17, 1955, rectifying this omission by adding clause 20-A to specify profit-sharing based on capital contributions. Despite this, registration under section 26A was initially refused for the assessment year 1955-56, a decision upheld by the Tribunal.The Tribunal referred the issue to the High Court, focusing on whether the firm was entitled to registration under section 26A. The assessee contended that the original deed of partnership, even without the later amendment, satisfied the requirements of section 26A by specifying individual shares of partners based on capital contributions. However, the Court disagreed, noting that without clause 20-A, the deed did not sufficiently specify individual shares as required by the Act.The Court acknowledged that the rectified deed, with clause 20-A, did meet the section 26A requirements by specifying individual shares based on capital contributions. However, this rectification occurred after the relevant accounting year, raising the question of whether it satisfied the statutory requirements for registration in the assessment year. The Court cited precedent cases to emphasize the importance of the deed's existence during the accounting year and the need for specific share specification.In conclusion, the Court held that the rectification made on September 17, 1955, did not enable the assessee to claim registration for the assessment year 1955-56. While the rectified deed specified individual shares, it did so beyond the relevant accounting year, failing to meet the statutory requirements for registration under section 26A. Therefore, the Court upheld the Tribunal's decision to refuse registration for the year in question, ruling against the assessee and ordering them to pay costs.