COMMISSIONER OF INCOME TAX Vs. BALAJI PICTURES
HIGH COURT OF ANDHRA PRADESH
COMMISSIONER OF INCOME TAX
Click here to view full judgement.
CHINNAPPA REDDY, J. -
(1.) THE ITO, by his order dt. 18th Feb., 1961, granted registration to the assessee -firm consisting of
four partners. Subsequent to the grant of registration the ITO discovered that one of them, though
a minor on the date of registration of the instrument of partnership, was treated as a full -fledged
partner. He, therefore, thought that the partnership was not valid and issued notice to the
assessee to show cause why the registration should not be cancelled under r. 6B of the Indian IT
Rules, 1922. After the assessee showed cause, the ITO cancelled the registration and his order was
confirmed by the AAC. The Tribunal held that r. 6B did not apply since it was confined in its
application only to firms which were not genuine, that is to say, firms which did not exist in fact.
The Tribunal, therefore, allowed the appeal of the assessee. At the instance of the CIT the question
whether the ITO was right in cancelling the registration has been referred to us. Rule 6B is as
"6B. In the event of the ITO being satisfied that the certificate granted under r. 4, or under r. 6A, has been obtained without there being a genuine firm in existence, he may cancel the certificate so granted."
(2.) IT is clear that under r. 6B, the ITO was empowered to cancel the certificate of registration only if he was satisfied that the firm was not a genuine firm in existence. The learned counsel for the
Department submitted that a firm which included a full -fledged minor partner was not a firm in the
eye of law and, therefore, action could be taken under r. 6B. We are not prepared to agree with the
submission of the learned counsel. The use of the expression "genuine" puts the matter beyond
doubt. We are of opinion that r. 6B applies only to firms which do not exist in fact as distinguished
from the firms which may exist in fact but may be considered as non -existent in law. We are
supported in our view by the decision of Obul Reddi and Venkateswara Rao, JJ. in R.C. No. 83 of
1968. The questions referred to us are therefore answered in favour of the assessee.;
Copyright © Regent Computronics Pvt.Ltd.