TaxTMI 
TaxTMI 
2005 (5) TMI 57
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.... The brief facts of the case are as follows: The applicant/assessee (hereinafter referred to as "the assessee"), was assessed in the status of a registered firm for the last several years but the first change in the constitution of the firm took place in the assessment year 1971-72 when one of the partners, namely, Vinod Narain, retired and in his place his two minor daughters, namely, Kum. Vineeta Narain and Kum. Smita Narain, were admitted to the partnership with equal shares of 121/2 per cent. The newly constituted firm continued till the accounting year relevant to the year 1977-78. In the assessment year 1976-77, the shares of the major partners was reduced from 25 per cent, to 15 per cent. and one new partner, Rajeev Narain, was adm....
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....e with terms and conditions incorporated in the partnership deed and on examining the entire material on record, the Inspecting Assistant Commissioner (Assessment) came to the conclusion that no genuine firm existed and as such he refused continuation of registration and treated the status of the firm as that of a body of individuals. The assessee filed an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) allowed the appeal and held that the application in Form No. 11A should have been considered on the merits. He was of the view that nothing was wanting regarding the genuineness of the firm and as such he directed the Assessing Officer (Assessment) to grant registration to the firm and to refr....
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....59] 36 ITR 194. In this case their Lordships of the hon'ble Supreme Court had held that in case the terms and conditions mentioned in the deed of partnership had not been fulfilled, then in that case the Income-tax Officer can refuse registration of the firm on the ground that it was not a genuine firm. We have considered the decision of the hon'ble Supreme Court in the case of Ashokbhai Chimanbhai [1965] 56 ITR 42 and we are of the opinion that this case is distinguishable on the facts because it deals with the assessment matter and furthermore it may be clarified that even after knowing that the terms and conditions of the partnership deed had not been complied with, even then necessary rectificatory entry had not been passed. So we hold ....
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....was perfectly justified in refusing to grant continuation of registration to the assessee-firm for the simple reason that the profits of the firm were not distributed as per the terms and conditions of the partnership deed. Having considered the facts and circumstances of the case, we accordingly reverse the order of the Commissioner of Income-tax (Appeals) and restore that of the Inspecting Assistant Commissioner (Assessment)." Heard Sri S.P. Gupta, the senior advocate assisted by Sri S.D. Singh, learned counsel for the assessee, and Sri Shambu Chopra, learned standing counsel for the Revenue. Learned counsel for the assessee submitted that the firm was in existence for long and merely because their shares have not been allocated in the ....
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....n the case of Ratanchand Darbarilal v. CIT [1985] 155 ITR 720, the apex court had specifically held that in case profit and loss are not divided in accordance with the terms and conditions mentioned in the partnership deed then that firm is not genuine and the Income-tax Officer is justified to refuse the registration to the partnership firm. In the case of Setha Ram Dhanvir Singh v. CIT [1980] 123 ITR 150 a Division Bench of this court held that the Income-tax Officer can refuse to register a firm if it was not a genuine firm with the constitution specified in the partnership deed. The firm must actually exist. It should not be a sham transaction or a mere pretence. The expression "genuine firm" denotes that the firm is really in existenc....