COMMISSIONER OF INCOME TAX Vs. BALAJI PICTURES
LAWS(APH)-1971-11-37
HIGH COURT OF ANDHRA PRADESH
Decided on November 22,1971

COMMISSIONER OF INCOME TAX Appellant
VERSUS
BALAJI PICTURES Respondents

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 follows : "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.;


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