- (1.) THE Income-tax Appellate Tribunal, Chandigarh Bench, has referred the following question of law for our opinion : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the firm was entitled to registration under Section 185 of the Income-tax Act, 1961 ? "
(2.) A firm known and styled as Messrs. Gian Chand and Co. , having five partners, obtained a licence in their separate names from the Fisheries Department of the Punjab Government for fishing in the public waters. They took another four persons as partners in the same firm. Thus, the firm came to be constituted of nine partners. The Income-tax Officer while looking into the claim for registration went into the past history of the case and in view of the frequent changes in the constitution of the firm took the view that these changes had been employed in order to reduce the incidence of taxation. This is the only basis on which he refused registration on the ground that the firm was not genuine. The assessee preferred an appeal to the Appellate Assistant Commissioner. The said Commissioner remanded the case to the Income-tax Officer for some other enquiries. On receipt of the remand report, the Appellate Assistant Commissioner rejected the appeal. The Appellate Assistant Commissioner also proceeded on another basis, namely, that the registration of the firm was illegal, in view of Rules 7 (1), 7 (8), 7 (9) and 7 (10) oi the Punjab Fisheries Rules. This view he took on the basis of the decisions in Commissioner of Income-tax v. Benarsi Das and Co. , [1962] 44 I. T. R. 835 (Punj.) Mohapatra Bhandar v. Commissioner of Income-tax, [1965] 58 I. T. R. 671 (Orissa) and Jer and Co. v. Commissioner of Income-tax, [1966] 60 I. T. R. 335 (All. ). The assessee then preferred an appeal to the Income-tax Appellate Tribunal. The Tribunal came to the conclusion that the frequent changes in the constitution of the firm even if made with the idea of reducing the incidence of tax were well within the legal right of the assessee. This matter should not have affected the mind of the Income-tax Officer as well as that of the Appellate Assistant Commissioner in the matter of registration of the firm. In other words, the finding of the Income-tax Officer and the Appellate Assistant Commissioner that the firm was not genuine was reversed.
(3.) WITH regard to the finding that the partnership was unlawful and, therefore, could not be registered, the view taken by the Tribunal was that the rules on the subject did not warrant such a conclusion. There was no express prohibition so far as the sale offish is concerned. The only right under the licence was to take out fish from the public waters. In this view of the matter, the Tribunal allowed the appeal and directed that the firm be registered. At the instance of the department the Tribunal has referred the question of law already referred to, for the opinion of this court.;