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Issues: Whether the execution of the partnership deed dated 23 May 1961 brought into existence a new partnership so as to require a fresh application for registration, and whether the cancellation of renewal of registration under the Income-tax Act, 1961 was valid.
Analysis: Under the 1961 Act, registration already granted continues for subsequent assessment years if there is no change in the constitution of the firm or in the shares of the partners as evidenced by the instrument of partnership, and the prescribed declaration is furnished. The relevant inquiry was therefore whether the later deed altered the partners or their shares. The partners remained the same and their shares remained equal. The later deed was executed to extend the duration of the existing partnership beyond its fixed term and did not effect a substantial alteration in the constitution of the firm. Changes in place of business, interest clause, and allied terms were not substantial enough to create a fresh partnership. The change brought by section 187 of the 1961 Act also shows that a change in constitution involves change in personnel or shares, neither of which occurred here.
Conclusion: The deed of 23 May 1961 did not create a new partnership, the declaration under section 184(7) was sufficient, and the cancellation of registration was unjustified. The answer is in favour of the assessee.
Ratio Decidendi: For the purpose of continued registration under section 184(7) of the Income-tax Act, 1961, a partnership is not treated as newly constituted unless there is a change in the partners or in their shares as evidenced by the registered instrument; mere extension of the partnership term or non-substantial alteration of ancillary terms does not require a fresh application for registration.
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