1986 (11) TMI 84 - AT - Income Tax

Partnership dissolution affects tax registration appeal for 1975-76. Deed of assignment results in dismissal.

The Tribunal upheld the decision to deny registration for the assessment year 1975-76 due to the dissolution of the original partnership and ... A Firm, Assessment Year, One Partner, Partnership Deed Issues:1. Whether there was a partnership firm existing in the relevant previous year for the assessment year 1975-76 as per the instrument of partnership.2. Whether the allocation of profits between the partners was in accordance with the partnership deed.Analysis:1. The appeal was filed by the assessee against the order of the Commissioner (Appeals) for the assessment year 1975-76, primarily challenging the finding that there was no partnership firm in existence as per the partnership instrument and that the profit allocation was not in line with the partnership deed. The firm, engaged in the manufacture and sale of pharmaceutical chemicals, had a history of partnership changes. Initially constituted by seven partners with specific profit-sharing ratios, a dispute arose leading to a deed of assignment on 1-9-1975, dissolving the original partnership. The Commissioner (Appeals) refused registration for the assessment year 1975-76 based on non-compliance with filing requirements and the dissolution of the original partnership.2. The Commissioner (Appeals) upheld the decision of the Income Tax Officer (ITO) to deny registration for the year under appeal due to the failure to file the necessary documents in time and the dissolution of the original partnership. The ITO had initially refused registration under section 185(1)(b) and later under section 143(3) of the Income-tax Act, 1961. The Commissioner emphasized the need for strict compliance with all legal requirements for registration under the Act, including the timely submission of Form No. 12. The appellant's argument that one partner had merely assigned their share and the original partnership continued was rejected, with the Tribunal finding that the deed of assignment effectively dissolved the original partnership, making it impossible to allocate profits as per the original deed.3. The Tribunal reviewed the evidence, including the deed of assignment, and concluded that the partnership of seven partners as initially constituted no longer existed during the relevant accounting year. The deed of assignment clearly stated the dissolution of the original partnership, with one partner relinquishing their share. The Tribunal found that the formalities for profit allocation and filing of necessary forms were not met, further supporting the dissolution of the original partnership. Ultimately, the Tribunal confirmed the decision of the Commissioner (Appeals) to deny registration for the assessment year 1975-76, leading to the dismissal of the appeal.