1964 (2) TMI 98

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....ment year 1955-56. for the assessment year1956-57,the assessee made an application for registration of the firm as constituted under the partnership deed dated the 26th April, 1955. under this document the Partners of the firm were as follow; (1)Durga Ram Kashyap ... 0-5-0 share (2)Kirp Ram Kashyap ... 0-5-0 " (3)Man Singh Kashyap ... 0-3-0 " (4)Karna Singh Kashyap ... 0-3-0 " The two new partners were the sons of the old partners, Kirpa Ram and Durga Ram, respectively. The shares of Kirpa Ram and Durga Ram were reduced from eight annas to five annas each and their sons were given three annas each in the profits of the firm. The Income-tax Officer held that the deed of partnership was not genuine and hence refused registration under sect....

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....he constitution of the firm was not notified to the banks in which the assessee had accounts in the name of the firm. The argument was stressed on behalf of the assessee that these circumstances have no relevant bearing on the question whether the partnership deed dated the 26th April, 1955, was a genuine transaction. In our opinion the argument put forward on behalf of the assessee is well founded and must be accepted as correct. In our opinion the present case is governed by the principle laid down by the Supreme Court in Umacharan Shaw & Bros. v. Commissioner of Income-tax [1959] 37 I.T.R. 271 (S.C.). In this case the claim for registration of the firm was rejected by the Income- tax Officer on the ground that there was no separate capit....

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....me-tax authorities under section 26A of the Income-tax Act?" On behalf of the assessee learned counsel submitted that there was no material to support the finding of the Tribunal that the instrument of partnership dated the 26th April, 1955, was a sham and nominal document. Learned counsel put forward the argument that none of the reasons given by the Tribunal supports the inference drawn by it that Man Singh and Karan Singh were not real partners of the firm. It was pointed out by the learned counsel that the Tribunal has stated in the first place that no capital was contributed by Man Singh or Karan Singh. The Tribunal has also referred to the circumstance that the change of the constitution of the firm was not notified to the banks in....

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....icion which could not take the place of proof. It was accordingly held by the Supreme Court that the firm should be registered under section 26A of the Income-tax Act for the assessment year in question. A similar view has been expressed by this High Court in Shahabuddin Mohammad Raza v. Commissioner of Income-tax [1962] 46 I.T.R. 203. In this case also it was pointed out by this High Court that the fact that there was no separate account of the partners or that no share capital was contributed by some of the partners originally is not a ground for refusing registration of the firm. The same principle has been expressed by the Madras High Court in S.S.K. Haja Allauddin Maracair v. Commissioner of Income-tax [1952] 22 I.T.R. 545, where it wa....