TaxTMI 
TaxTMI 
1980 (10) TMI 16
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.... application for continuation was also rejected by the ITO. The constitution of the assessee-firm as set out in the partnership deed dated 20th November, 1965, is as follows: (1) Smt. Sushila Devi, w/o. Rameshchandra 30 paise in a rupee. Agrawal (2) Shri Uttamchandji, s/o. Mishrilalji 30 paise in a rupee. (3) Shri Santosh Trading Co. through 30 paise in a rupee. its partners (4) Shri Phoolchandji Ghisalalji 10 paise in a rupee. In the preamble of the partnership deed partner No. (3) is described as "partners of M/s. Santosh Trading Co., respectively, Shri Mishrilalji Ratanlalji Chopra, Shri Bhanwarlalji Misrilalji and Shri Hemchandji Mishrilalji ". The partnership deed is signed by all the six partners, i. e., partners Nos. (1), (2) and (4) and the three partners of M/s. Santosh Trading Co. Application for registration in the prescribed Form No. 11 has also been signed by all the six partners who have signed the partnership deed as the partners of the assessee-firm. The partnership deed in cl. 6 specifies the shares In the profit and loss of the partners. The share of the firm, M/s. Santosh Trading Co., through the partners has been mentioned as 30 paise in a rupe....
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.... The requirements under s. 184(1)(i) and (ii) of the Act as set out above are intended for the purpose of ascertaining the genuineness of the firm and its constitution as specified in the instrument of partnership. The specification of individual shares is necessary for apportioning the income falling to the shares of the individual partners for tax assessments of their total income. There is no ritualistic sanctity about the requirements as to specification of the shares of the individual partners in the instrument of partnership itself because, as observed above, the purpose is to ascertain the share income of each partner for assessing his total income. In Chhotalal Devchand v. CIT [1958] 34 ITR 351 (Bom), the question of registration of the firm had arisen on the following facts. A partnership was arrived at between three parties, viz., two firms and an individual. The deed was signed by all the individuals constituting the two firms and the individual partner. The capital was to be contributed by the three parties and the profit and loss was also to be divided in equal shares by the parties. Registration was refused on the ground, (i) that it was not valid partnership as....
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.... been shown as a partner of the larger firm. Besides, the shares of individual partners in profits and losses had not been specified in the partnership deed of the larger firms but the same was ascertainable from the partnership deed of the smaller firm. The Supreme Court overruling the decision of the Andhra Pradesh High Court in Kylasa Sarabhaiah v. CIT [1962] 46 ITR 470, held that the firm was entitled to registration. The Madhya Pradesh High Court in CIT v. R. S. Nikhera Construction Co. [1978] 114 ITR 294, relying on Parekh Wadilal [1967] 63 ITR 485 (SC) and Kylasa Sarabhaiah [1965] 56 ITR 219 (SC), held that the specification of shares in the partnership deed need not be express and it may be implied. According to the Madhya Pradesh High Court the requirement of s. 26A (1922 Act) is satisfied if the deed can be reasonably construed as clearly implying that the shares of the partners are equal. Similar view has been taken by the Andhra Pradesh High Court in CIT v. Hyderabad Stone Depot. [1977]109 ITR 686 [FB] and CIT v. Krishna Mining Co. [1980] 122 ITR 362 [FB]. The Appellate Tribunal had relied on an earlier decision of the Andhra Pradesh High Court in Khummaji Milapch....
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.... the deed and the overall intention of the contracting parties which can be culled out from this instrument is that the partners of the firm, Santosh Trading Co., had entered into the partnership agreement with other partners and, therefore, the firm was constituted legally. It is true that the share of the partners of Santosh Trading Co. had been specified as 30 paise in a rupee. This was the composite share of all the three partners of Santosh Trading Co. and their individual share had not been specified in the deed itself. The ITO had written a letter to the assessee-firm drawing its attention to this lacuna. The reply on behalf of the assessee was that the sharing ratio of the partners of Santosh Trading Co. could be looked into for the purpose of ascertaining the individual share of each partner therein. In another letter it was submitted alternatively that if that was not possible then shares should be deemed to be equal in accordance with s. 13 of the Partnership Act. The ITO examined the instrument of partnership of the firm, Santosh Trading Co., as he was dealing with the assessment of that firm as well. After examining that document from the records of that firm, th....