TaxTMI 
TaxTMI 
1984 (4) TMI 31
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....riends & Co., Dhamani Market, Jaipur. He had 12 1/2% share in the profit and loss of that firm, for the accounting period corresponding to the assessment year 1968-69 which began on April 1, 1967, and ended on March 31, 1968. Shri Rahmat Khan entered into an agreement of partnership with one Shri Faizu Khan S/o. Molabux in respect of his share of 12 1/2% in M/s New Friends & Co. The formal partnership deed was drawn on January 27, 1968, between Shri Rahmat Khan and Shri Faizu Khan. The preamble to the partnership deed dated January 27, 1968, amongst others, contains the following recitals : ".. ......... and whereas the parties hereto have on and from April 1, 1967, agreed to be partners in the profit and loss of 12 1/2% in the name of the party hereto of the first part in the firm of M/s. New Friends & Co., Jaipur, and whereas to avoid future differences the parties have agreed to execute a deed of partnership. " It will also be useful to refer to clauses 3, 4 and 6 of the partnership deed which are as under: " 3. The partnership business shall be for a period for which I he party hereto of the first part may desire and he will be at liberty to keep the party hereto of th....
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....n, Faizu Khan Bikaner, regarding the assessment year 1968-69. The Tribunal by its order dated April 22, 1974, reversed the orders refusing to register the firm and directed that registration should be granted to the firm as per its request as it is genuine firm as per the material on record. An application under s. 256(1) of the Act was filed by the Commissioner of Income-tax to refer the questions stated in the application for the opinion of this court in respect of assessment year l 968-69. The Tribunal, however, has referred the two questions stated hereinabove for our decision. Section 4 of the Indian Partnership Act, 1932 (Act No. IX of 1932) (for the sake of brevity it will be referred to as " the Partnership Act ") defines partnership ", " partner " and " firm as under : " 4. Definition of 'partnership ' Partner ', 'firm' and 'firm name 'Partnership' is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another )re called individually 'partners' and collectively 'a firm', and the name under which their business is carried on is calle....
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.... of a firm under s. 185 of the Act. (i) An application on behalf of the firm should be made to the ITO before the end of the accounting year and the application should comply with the requirements of s. 184 and rr. 22 to 24. (ii) The firm should be evidenced by an instrument of partnership. (iii) The instrument should specify the individual shares of the partners. (iv) The partnership should be valid and genuine and should actually be constituted as specified in the instrument. Before the Tribunal, on behalf of the Revenue, a contention was raised on the basis of the portion of the preamble of the partnership deed which has already been excerpted above that there was no partnership, oral or otherwise, existing between Rahmat Khan and Faizu Khan prior to January 27,1968, that in fact the partnership was entered into between them from the date of the partnership deed, i.e., January 27, 1968, and further that the partnership deed could not bring into existence the relationship of partners with retrospective effect, i.e., from April 1, 1967. Reference was made before the Tribunal to the following clause in the partnership deed: (1). "The name of the partnership shall ....
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....t instance to determine the intention of the parties, and when ambiguous expressions are used, the court may normally adopt that interpretation which upholds the deed, if the Parties thereto have acted on the assumption of its validity....(underlining is our own). Applying the tests laid down in the aforesaid authorities and having regard to the dominant intention of the parties and considering the partnership deed as a whole, it is clear that the parties in the partnership deed had agreed to be partners in the profit and loss on and from April 1, 1967, and the terms were reduced to writing on January 27, 1968, the date when the partnership deed came into existence. This has to be considered in the light of the following facts and circumstances regarding which no dispute has been raised on behalf of the Revenue. There is no dispute that Shri Rahmat Khan and Shri Faizu Khan had entered into an agreement of partnership, that a sum of Rs. 10,000 was paid by Shri Faizu Khan and that since then Shri Faizu Khan had been looking after the business of M/s New Friends & Co, It was a partnership firm under s. 4 of the Partnership Act. The words " hereto have on and from April 1, 1967 " ar....