Decided on March 15,1993



T.N.C. Rangarajan, Vice-President - (1.) THIS appeal is directed against an order made under Section 185 of the Income-tax Act cancelling the registration granted to the assessee flrm.
(2.) There was originally a firm constituted on 1-7-1979 with three partners, Ashok Kumar Gangoly, Kuldeep Singh Nanda and Arun Kumar Gangoly, carrying on the business of poultry farming and agriculture in the name of M/s. Arun Kumar Farming Corporation. That firm had been granted registration. The firm was re-constituted by a partnership deed dated 30-3-1982. The partners under the document were Ashok Kumar Gangoly, Kuldeep Singh Nanda, Arun Kumar Gangoly and Kuldeep Singh Nanda acting as promoter of a proposed company called M/s. Ashok Kumar Agencies (P) Ltd. For the assessment year 1982-83, corresponding to the previous year ended 31-3-1982, the assessee filed an application in Form No. 11A for registration. The assessee also filed an application under Section 144A on 29-12-1983 before the IAC for a direction to the ITO to grant registration. The IAC was of the opinion that since the company, which was to be represented by Kuldeep Singh Nanda, had been incorporated only subsequently and was not in existence on the date of the partnership deed, Kuldeep Singh Nanda could not represent a non-existent person and consequently the firm was not a genuine firm. He was also of the opinion that Kuldeep Singh Nanda could not be a party to the document in the dual capacity, one for himself and again as a promoter of a company. Hence, he directed the ITO by his order dated 11-2-1986 to refuse registration, which was accordingly done on 19-3-1986. On appeal, the CIT(A) accepted that Kuldeep Singh Nanda could become a partner in dual capacity but he could not represent a non-existent company and accordingly confirmed the order. In further appeal before us, it was contended on behalf of the assessee that the representative capacity of a partner was irrelevant for considering the genuineness of the firm and reliance was placed on the decision of the Supreme Court in the case of CIT v. Bagyalakshmi & Co. [1965] 55 ITR 660. It was also submitted that the promoter could enter into partnership and his actions were subsequently ratified by the company. It was submitted that in the circumstances the assessee was entitled to registration. On the other hand, it was pointed out on behalf of the revenue that as on 30-3-1982, when the firm was constituted, the company was not at all in existence as it was incorporated only on 10-6-1982 and there was no evidence of Kuldeep Singh Nanda having taken any steps to form the company. It was submitted that in the circumstances the orders of the authorities below should be upheld.
(3.) WE have considered the submissions of both the parties and we have perused the partnership deed. WE find that Kuldeep Singh Nanda was a partner representing himself and also as a promoter of a proposed company. The very statement in the document that he was promoter of a proposed company amounts to his holding out as a promoter and no further evidence is required to accept his representative capacity. The Company Law recognizes the capacity of a promoter to enter into partnership and any other contracts or agreements in anticipation of the incorporation of the company and requires the company to accept and ratify all his actions. When such ratification is made, it dates back so as to accept even transactions entered into prior to the incorporation as that of the company (See the Karnataka High Court decision in Chief CIT v. Senapathy Whitely Ltd. [1992] 198 ITR 753. Moreover, it is of no consequence to the other partners or to the validity of a deed of partnership that one of the partners represents some other person, as held by the Supreme Court in the case of Bagyalakshmi & Co. (supra). It has also been held by the Bombay High Court in CIT v. Raghavji Anandji & Co. [1975] 100 ITR 246 that the same person can act in two different capacities in forming a partnership with others. It is also established by the assessee that after incorporation the company has ratified the acts of Kuldeep Singh Nanda. Taking all these facts into consideration, we are convinced that the firm is genuine and is entitled to registration. WE direct accordingly.;

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