COMMISSIONER OF INCOME TAX ANDHRA PRADESH Vs. B PANDAIAH AND COMPANY
LAWS(APH)-1982-12-41
HIGH COURT OF ANDHRA PRADESH
Decided on December 21,1982

COMMISSIONER OF INCOME-TAX, ANDHRA PRADESH Appellant
VERSUS
B.PANDAIAH AND COMPANY Respondents

JUDGEMENT

Jeevan Reddy J. - (1.) The Income-tax Appellate Tribunal, Hyderabad, has referred the following question for our opinion under s. 256(1) of the I.T. Act, 1961 : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in directing registration to the firm, M/s. B. Pandaiah and Co., for the assessment year 1973-74 ?"
(2.) The facts relevant to the question are. The appellant-firm consisting of two partners was carrying on business in kirana goods, etc. The two parties, who are brothers, admitted their brother who is congenitally deaf and dumb, to the benefits of the partnership. A partnership deed was executed an 20/10/1972, giving one-third share in the profits to the said brother, but making him not liable for the losses. As application for registration under s. 184 of the Indian I.T. Act was made, signed only by the two partner-brothers. The ITO was satisfied that the application was in order and that the firm was genuine but refused registration on the ground that the admission of an adult member to the benefits of the partnership is not recognised by law; and therefore, such a partnership is invalid and cannot be registered under the I.T. Act. On appeal, the AAC affirmed the said view. On further appeal, the Tribunal agreed with the view taken by the lower authorities that an adult, even if he is a congenital idiot or is congenitally deaf and dumb, cannot be admitted to the benefits of the partnership but allowed the appeal on a difference ground altogether. The Tribunal observed : "It is open to the partners of a business to agree not to take the whole of the profits of the partnership for their own personal use and to reserve part of the profits for same other purpose, so to say, for a charitable purpose. Herein the two partners, Sri B. Pandaiah and Shri B. Yadaiah, have evidently intended to set apart 1/3rd of the profit for the benefit of their brother, Shri B. Chandraiah, who is a deaf and dumb person. That is all they wanted to do on 20/10/1972, on which day the partnership deed was executed. It may be that they did not express themselves properly in the partnership deed. I our opinion, the firm is entitled to registration on the basis of the deed of the partnership executed by two component person."
(3.) The Tribunal, therefore, directed the ITO to grant registration accordingly.;


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