2002 (11) TMI 60

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....c., the Tribunal is right in law and fact in holding that the assessee is only a money-lender and 'is not carrying on the business of banking' ? 2. Whether, on the facts and in the circumstances of the case, the asses see is entitled to registration under the Income-tax Act ?" The respondent-assessee is a partnership firm with more than ten partners but less than twenty engaged, inter alia, in "banking" business. This firm was originally constituted as per a partnership deed dated April 16, 1975, and the firm was granted registration under the Act up to the assessment year 1980 81. However, when the assessee had made an application in Form No. 11A after reconstitution of the firm the assessing authority refused to grant registration o....

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....rst appellate authority has also taken the same view. The Tribunal, however, referred to the provisions of section 11(1) of the Companies Act and held that since the partnership firm was registered under the Indian Partner ship Act and also obtained licence under the Money Lenders Act the requirements of section 11(1) are satisfied and, therefore, the assessee-firm is entitled to registration. Let us now examine the provisions of section 11 of the Companies Act and section 5(b) of the Banking Regulation Act, Section 11 of the Companies Act reads thus: "11. Prohibition of associations and partnerships exceeding certain number. - (1) No company, association or partnership consisting of more than ten persons shall be formed for the pu....

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.... the moment that the assessee is engaged in receiving deposits and also in lending money and, therefore, the business of the assessee will fall within the definition of 'banking' in section 5(b) quoted above. That apart, the partnership deed itself provides that the business of the assessee is 'banking'. Let us now examine the question as to whether the conduct of the banking business by the assessee is in violation of the provisions of section 11 of the Companies Act as held by the Assessing Officer and affirmed by the Commissioner of Income-tax (Appeals). Section 11 of the Companies Act in so far as it relates to a partnership only says that no partnership consisting of more than ten persons shall be formed for the purpose of carrying on ....