A. Kalyanasundaram, Accountant Member - (1.) THE assessee has come up in appeal against refusal of registration under Section 185(1)(b) of the Income-tax Act, 1961 ('the Act').
(2.) Mr. N. M. Ranka, the learned representative of the assessee, submitted the following facts. That the firm originally comprised of the four partners, namely, Shri Bhagwandas, Kailashchandra, Ramniwas and Jitendra Kumar. Shri Ramniwas and Jitendra Kumar retired and from 2-1-1978, Smt. Saraswati Devi and the minor, Shri Rajendra Prasad, became the new partners of the firm. As per the partnership deed, the share of profits/ losses to be shared by the partners was: JUDGEMENT_6001_TLIT0_19840.htm Mr. Ranka further submitted that the firm in the immediately preceding year was granted registration. 3. Mr. Ranka submitted that the ITO did not grant the registration on couple of grounds. The first being that no partnership could be constituted between the HUF and the coparceners of the HUF. The second being, Kailashchandra could not be examined in spite of opportunities provided. The assessee could not at all state the nature of work done by Smt. Saraswati Devi, wife of karta of Shri Bhagwandas (HUF) and Shri Kailashchandra. Smt. Saraswati Devi in her statement stated that she was a sleeping partner, while the partnership deed did not mention this fact that she was a sleeping partner. 4. The entire work, according to the ITO, was done by Shri Bhagwandas alone and, therefore, he was of the view that the partnership was not a genuine one. Mr. Ranka drew our attention to page 19 of the paper book, where the officer had granted the registration of the firm in which Shri Bhagwandas, Kailashchandra along with two others were partners for the assessment year 1978-79. Mr. Ranka, therefore, submitted that it was admitted by the department that Shri Kailashchandra was a partner in the immediately preceding assessment year and merely because in the present assessment year Shri Kailashchandra could not present himself, cannot lead to the conclusion that he was not a partner in the firm. Mr. Ranka further submitted that there is no requirement that all the partners must work in the firm. Merely because Smt. Saraswati Devi mentioned in her affidavit that she was a sleeping or dormant partner and this fact was not mentioned in the partnership deed, could not be the ground for treating the firm as a non-genuine one. Mr. Ranka pointed out that the department is satisfied that Smt. Saraswati Devi had contributed capital. For this purpose, he drew our attention to page 25, where the capital accounts of the partners have been filed. The quantum of capital contribution is not a very relevant one ; though Smt. Saraswati Devi has contributed a sum of Rs. 6,000 only, the Income-tax Department has been satisfied that she had, in fact, contributed this capital. The grievance of the department is that the fact that she was a dormant partner, was not mentioned in the partnership deed. For the proposition that any one partner can act on behalf of all the partners, he relied on several judgments including the case of Subhash Medical Stores v. CIT [1984] 147 ITR 486 of the Rajasthan High Court. He also relied on this judgment for the paltry sum of contribution by some partners. Regarding the dormant partners, he relied on United Patel Construction Co. v. CIT [1966] 59 ITR 424 (MP) and in the case of K.D. Kamath & Co. v. CIT [1971] 82 ITR 680 (SC).
(3.) FOR the proposition that there could be partnership between the karta of the HUF and the coparceners, Mr. Ranka relied on Lachhman Das v. CIT [1948] 16 ITR 35 (PC), Ramchand Nawalrai v. CIT [1981] 130 ITR 826 (MP), CIT v. Gupta Bros. [1981] 131 ITR 492 (All.) and CIT v. Gaekwade Vasappa & Sons [1983] 143 ITR 1 (AP). Mr. Ranka, therefore, stated that the firm, in which Shri Bhagwandas (HUF) was a partner, was allowed registration in the earlier years and in the year merely because he carries on the activity of the business for and on behalf of the partners, it cannot be said that he is acting as a benamidar of the partners. He, therefore, pleaded that in view of the various submissions, the firm is a genuine one and the registration must be granted.;