Partnership Instrument Must Precede Year End for Registration

The court held that an instrument of partnership must exist before the end of the previous year for registration, and delay in executing the instrument beyond the accounting period cannot be condoned. The court referred to relevant sections of the Income Tax Act and emphasized that the partnership should be evidenced by an instrument before applying for registration. The court ruled against the assessee, affirming the decisions of the lower authorities, and directed each party to bear their own costs.

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Issues:
1. Whether the Tribunal was justified in holding that an instrument of partnership must be in existence before the end of the previous year for grant of registrationRs.
2. Whether the delay in executing the instrument of partnership beyond the accounting period can be condoned by the TribunalRs.

Analysis:
The case involved the issue of whether an instrument of partnership must exist before the end of the previous year for registration and if the delay in executing the instrument can be condoned. The assessee-firm was constituted by a partnership deed dated July 8, 1971, effective from March 1, 1971. Subsequently, a partner died, and a new partnership deed was executed retrospectively from January 15, 1972. An application for registration was filed on August 27, 1973, with a request for condonation of the delay. The ITO rejected the application due to the absence of a partnership deed from January 15, 1972, to March 31, 1972, which was upheld by the AAC and the Tribunal.

The counsel for the assessee contended that there is no requirement for the firm to be constituted by a written deed before the end of the accounting year. However, the court referred to the Supreme Court decision in R. C. Mitter & Sons v. CIT, which emphasized that the terms of the partnership should appear in the instrument of partnership for the relevant accounting year. The court highlighted that the provisions of the Income Tax Act mandate the partnership to be evidenced by an instrument before applying for registration.

The court further discussed the relevant sections of the Income Tax Act, including Section 184 and 185, which specify the requirements for registration, such as the application being made before the end of the previous year and being accompanied by the original instrument evidencing the partnership. The court also referred to Rule 22(2)(ii)(b) of the I.T. Rules, 1962, which emphasizes the submission of the original instrument of partnership for registration.

Regarding the contention on condonation of delay, the court rejected the argument that the proviso to Section 184(4) could condone the delay in executing the partnership deed. The court clarified that the proviso only pertains to condoning the delay in making the application for registration, not in executing the instrument. Consequently, the court answered the first question in the affirmative and the second question in the negative, ruling against the assessee and directing each party to bear their own costs.

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