Full Judgment Text
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PETITIONER:
S.P. GRAMOPHONE COMPANY
Vs.
RESPONDENT:
C.I.T., PATIALA
DATE OF JUDGMENT29/01/1986
BENCH:
TULZAPURKAR, V.D.
BENCH:
TULZAPURKAR, V.D.
MUKHARJI, SABYASACHI (J)
CITATION:
1986 AIR 1152 1986 SCR (1) 164
1986 SCC (2) 1 1986 SCALE (1)137
ACT:
Indian Income Tax Act 1922 & Income Tax Act 1961:
Section 26A/Sections 184 & 185 - Firm - Registration of
- Refusal by Tax Authorities - When valid - Instrument of
partnership - Not militating against firm’s validity in law
But pointer against factual genuineness.
HEADNOTE:
Prior to the Assessment Year 1961-62 the appellant-f1rm
was a partnership concern consisting of two partners, each
having 50% share in the profits and losses of the firm and
it was granted registration. Both the partners met with an
accident on 19.10.1958 in which they suffered serious
injuries and became invalid. On 1.4.1960 a fresh Deed of
Partnership was executed by virtue of which the two original
partners retained 25% share each while the four new incoming
partners were given 12.1/2% share each. Prior to April
1,1960 two of the new incoming partners were already working
as employees in the original firm. The fresh Partnership
Deed, inter alia, provided that the partnership was at will
determinable by one month’s notice in writing.
For the Assessment Year 1961-62 an application duly
signed by all the partners seeking registration of the firm
under s. 26A of the Income Tax Act 1922 on the strength of
the fresh Partnership Deed was made on 15th September 1960
annexing therewith the original Partnership Deed. The four
new incoming partners were examined by the Income Tax
Officer and their statements were recorded, which, the ITO
felt, clearly suggested that they were not real partners but
dummies brought in to avoid the higher tax incidence. After
considering the Partnership Deed, the statement of the four
new incoming partners and the fact that profits had not been
shown to have been distributed in the books and no entries
made in the year of account, the ITO rejected the
application and refused registration.
The view taken by the Income Tax Officer was confirmed
by the Appellate Assistant Commissioner and by the Tribunal.
165
The Tribunal, however, was of the view that four new
incoming partners were benmidars of the two original
partners.
On Reference made to the High Court, the High Court
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felt that the first question referred to it did not bring
into focus the real issue and, therefore, recast the same.
The High Court upholding the refusal of registration held:
(1) that no genuine partnership had come into existence and
that the finding of the lower authorities in that behalf was
based on ample material on record; (2) that the assessee is
not entitled to the registration under s.26A of the Income
Tax Act, 1922 read with Rule 6 of the Income Tax Rules,
1922; and (3) that the mere fact that the four new incoming
partners were found to be benamidars of the two original
partners could not be a proper ground for refusing
registration.
In the appeal to this Court on behalf of the appellant
it was contended: (i) that refusal to grant registration to
the extent that it was based on the ground that no valid
partnership in law had come into existence was
unsustainable; (ii) that there was no evidence to justify
the finding on the genuineness of the appellant firm, and
(iii) that the High Court having held that registration
could not be refused merely on the ground that some of the
partners were benamidars, registration ought to have been
granted.
On behalf of the Revenue it was contended: (1) that
even if a valid partnership in law came into existence by
executing the Deed registration could be refused on the
ground that factually no genuine firm had come into
existence; (2) that it is open to the High Court to reframe
or recast a question formulated by the Tribunal before
answering it so as to bring out a real issue between the
parties; (3) that the High Court had rightly affirmed the
view of the Tribunal that the appellant-firm had not
genuinely come into existence; (4) that though under the
1922 Act no provision similar to the Explanation to Sec.185
of 1961 Act obtained and the fact that some members were
benamidars of others in a firm could be no bar to the grant
of registration, if the taxing authorities were to record an
adverse finding on the factual genuineness of the firm
registration could be refused; and (5) that so far as the
actual division or distribution of profits, the lower
authorities were justified in not relying on loose sheets
indicating the working of the firm and the assessee cannot
be allowed to fill the lacuna by producing books for the
following year.
Dismissing the Appeal,
166
^
HELD: 1.The concept of a firm being valid in law is
distinct from the factual genuineness and for the purpose of
granting registration both aspects are relevant and must be
present and one without the other will be insufficient.
[l73 G]
2. Even if a firm brought into existence by executing
an instrument of partnership deed is shown to possess all
the legal attributes it would be open to the taxing
authority to refuse registration if it were satisfied that
no genuine firm has been constituted. Moreover, some of the
provisions contained in such instrument may not militate
against the firm’s validity in law but these can be a
pointer against its factual genuineness. [173 G-H; 174 A]
3. Clause 5 of the Partnership Deed in the instant
case, vests the control and management of the partnership
business in the original two partners and denies to the four
new incoming partners any right in the management of the
affairs or the accounts of the partnership business, may not
show lack of the element of mutual agency but has a vital
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bearing on the factual genuineness of the firm and read
along with Clauses 3,6,7 and 8 would go to show that the
four new incoming partners were no real partners but were
dummies thus throwing doubt on the genuineness of the firm.
Moreover, the facts that the four new incoming partners were
very close relatives of the two original partners and that
two of them were working as employees in the erstwhile firm
whose service as such were continued in the relevant year on
existing remuneration with such increments as the two
original partners may agree to give cannot be lost sight of.
In addition, the statements of the four new incoming
partners that were recorded in November 1965 clearly show
that they had signed the instrument mechanically without
knowing or reading, much less after understanding the
implications thereof. [174 A-D]
4. In the instant case, the profit and loss account
statement prepared on loose sheet did not contain any
distribution of profits and or allocation thereof to each
one of the new partners. [175 E]
5. Production of account books in this Court has
deprived the taxing authorities an opportunity to make their
comments thereon. Apart from this aspect the question would
be whether even such entries were genuine entries intended
to be acted upon or mere paper entries making a show of
allocation
167
of the share of profits due to each one of these four new
incoming partners and this would require further
investigation into relevant facts. This aspect throws
considerable doubt on the point whether or not entries were
intended to be acted upon. [175 G-H; 176 B]
6. In the instant case, there was sufficient material
on record on the basis of which the taxing authorities as
well as the Tribunal could record an adverse finding on the
genuineness of the firm against the assessee and
registration was rightly refused. [176 C]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: CIVIL Appeal No. 850 of 1974.
From the Judgment and Order dated 24.9.1973 of the
Punjab and Haryana High Court in Income Tax Reference No. 21
of 1972.
S.T. Desai, M/s. J.B. Dadachanji, Harish Salve, P.K.
Ram and Mrs. A.K. Verma for the appellant.
V.S. Desai, Gauri Shankar and Miss A. Subhashini for
the respondent.
The Judgment of the Court was delivered by
TULZAPUKAR, J. This appeal raises the question of
granting registration to the appellant-firm (the assessee)
under s. 26-A of the Income Tax Act, 1922 for the Assessment
Year 1961-62. The taxing authorities, the Tribunal and the
High Court have refused registration sought by the
appellant-firm and hence this appeal.
Prior to the Assessment Year 1961-62 the appellant-firm
was a partnership concern consisting of two partners, Shri
Pal Singh and Shri Sadhu Singh, each having 50% share in the
profits and losses of the firm and it was being granted
registration. It appears that the two partners met with an
accident on 19.10.1958 in which Shri Pal Singh suffered a
serious head injury and lost his memory for quite some time
while Shri Sadhu Singh suffered an injury to the spinal cord
which rendered him invalid for quite a long time and the
case put forward was that as the business was on extensive
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scale and the two partners were physically handicapped (they
recovered during the meantime) they entered into a fresh
Deed of Partnership on 1.4.1960 by virtue of which Pal Singh
and Sadhu
168
Singh of the one part and Sarvashri Surjit Singh, Gulzar
Singh, Hari Singh and Harbans Singh of the second part
became partners with the following share ratio in the
profits and losses, namely, Pal Singh and Sadhu Singh the
original two partners retained 25% share each while Surjit
Singh, Gulzar Singh, Hari Singh and Harbans Singh were given
12-1/2% share each. Admittedly two of the new incoming
partners, namely Surjit Singh and Gulzar Singh were relate
to Pal Singh being his son and brother respectively who were
obviously accommodated within the 50% share originally owned
by Shri Pal Singh while the other two incoming partners Hari
Singh and Harbans Singh were related to Shri Sadhu Singh
both being his brothers who were accommodated within the 50%
share originally owned by Sadhu Singh. Moreover, prior to
April 1, 1960 Hari Singh and Harbans Singh were already
working as employees in the original firm.
At this stage it will be convenient to indicate some of
the salient clauses of the Partnership Deed entered into
between the parties on 1.4.1960. Under cl. 1 the partnership
was declared to be one at will determinable by one month’s
notice in writing and under cl. 3 the parties of the second
part (i.e. the four new incoming partners) were not required
to contribute any capital but the original two partners were
to do so in equal shares. Clause 4 provided that Shri Hari
Singh and Shri Harbans Singh shall continue to draw their
salaries or other remuneration from the firm as was being
drawn by them along with any increment as agreed to by the
parties of the first part (the original two partners) from
time to time. Clause 5 was significant as it provided that
the four new incoming partners "shall not interfere in the
management or the affairs or the accounts of the partnership
business." Under clause 7 it was provided that none of the
four new incoming partners shall sell, mortgage,
hypothecate, gift or will away or alienate in any way
whatsoever his share to any third person and that in case of
need they shall alienate their shares in favour of the
parties of the first part (the two original partners) only
and not even to any one amongst them. It was further
provided that in case of a dispute among the partners
regarding any of the clauses of the deed the decision of the
partners of the first part (two original partners) shall be
final and conclusive and binding and shall not be called
into question in any court of law.
169
For the Assessment Year 1961-62 (the relevant
accounting year in respect whereof ended on March 31, 1961)
an application duly signed by all the partners seeking
registration of the firm under sec. 26-A on the strength of
the aforesaid Deed of Partnership was made on 15th
September, 1960 and the original Partnership Deed was
annexed thereto. The four new incoming partners were
examined by the I.T.O. and their statements were recorded
which, the I.T.O. felt, clearly suggested that they were not
real partners but dummies brought in to avoid the higher tax
incidence. After considering the several clauses contained
in the partnership deed, the statement of the four new
incoming partners and the surrounding circumstances
including the fact that profits had not been shown to have
been distributed in the books and no entries made in the
year of account, the I.T.O. rejected the application
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principally on two grounds: (a) that in law no valid
partnership had been created inasmuch as the element of
mutual agency was lacking and (b) factually no genuine firm
has come into existence inasmuch as the four new incoming
partners were y dummies. Registration was also refused on
two other grounds, namely, there was a breach of the terms
of the Partnership Deed in that, even in the absence of a
provision in that ; behalf, salary and remuneration were
credited in the personal r accounts of the two original
partners Pal Singh and Sadhu Singh and there was non-
compliance of income tax rules. In appeal preferred by the
assessee the Appellate Assistant Commissioner after
discussing the several issues at great length confirmed the
I.T.O.’s order refusing registration. In the further appeal
preferred by the assessee to the Tribunal the view of the
A.A.C. was confirmed by the Tribunal but in doing so the
Tribunal expressed the view that four new incoming partners
were benamidars of Shri Pal Singh and Shri Sadhu Singh. At
the instance of the assessee the following three questions
were referred to the High Court for its opinion.
(1) Whether on the facts and in the circumstances
of the case and on a true construction of the
instrument of partnership dated 1st April 1960 a
valid partnership came into existance?
(2) Whether on the facts and in the circumstances
of the case the assessee is entitled to
registration under section 26-A of the Income Tax
Act, 1922 read with Rule 6 of the Income Tax
Rules, 1922? and
170
(3) Whether on the facts and in the circumstances
of the case and in view of the fact that the
parties of the second part have been found to be
benamidars of the parties of the first part the
assessee firm is entitled to the grant of regis-
tration?
The High Court felt that the first question referred to
it by the Tribunal did not bring into focus the real issue
that arose between the parties and therefore the same was
required to be recast or reframed and it reframed the
question thus:
Whether on the facts and in the circumstances of
the case, and on true construction of the
instrument of partnership dated 1st April, 1960
there is a genuine partnership, and whether the
finding that there is no genuine partnership is
based on evidence?"
After considering the entire material on the record as also
the rival contentions urged before it by counsel on the
either side the High Court answered the first question in
favour of the department and against the assessee, that is
to say, it held that no genuine partnership had come into
existence and that the finding of the lower authorities in
that behalf was based on ample material on record. The
second question was also answered in the negative in favour
of the department and against the assessee. As regards the
third question it was answered in favour of the assessee and
it was held that the mere fact that the four new incoming
partners were found to be benamidars of the two original
partners could not be a proper ground for refusing
registration. However, in view of its answers to the first
two questions particularly the first question as reframed
refusal of registration was upheld by the High Court.
This refusal to grant registration for the assessment
year 1961-62 has been challenged by the appellant-firm
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(assessee) in this appeal and counsel for the assessee
raised three or four contentions in that behalf. On the
aspect of the firm’s validity in law counsel contended that
the view taken by the taxing authorities as well as the
Tribunal that no valid partnership in law had come into
existence for lack of mutual agency has proceeded on a
misconstruction of s. 4 of the Partnership Act as also
clause 5 of the Partnership Deed in question; according to
him so far as the element of mutual agency is concerned all
that is required to constitute a valid firm under s. 4 is
that the business must be carried on by all
171
or any of them acting for all and therefore, if the control
and management of the business of the firm was left by
agreement between the parties in the hands of even one
partner to be exercised by him on behalf of the others the
legal requirement could be said to have been satisfied and
clause 5 of the Partnership Deed in question vests such
control and management with two partners (the two original
partners) who would be acting on behalf of all and the mere
exclusion of the four new incoming partners from such
control and management cannot affect the validity of the-
firm and in this behalf counsel relied on a decision of this
Court in K.D. Kamath and Co. v. C.I.T. Mysore, 82 I.T.R.
680. In other words counsel urged that if clause 5 of the
Deed is properly read it could not be said that there was
any lack of the element of mutual agency. On the aspect
whether a genuine firm had come into existence or not
counsel urged that the Tribunal had not recorded any clear
finding but had merely proceeded on the basis that no valid
firm in law had come into existence but the High Court went
out of its way to deal with the question of genuineness of
the appellant-firm by recasting or reframing the first
question referred to it, and recorded an adverse finding
thereon which should not have been done by the High Court.
Counsel further pointed out that the Tribunal had
erroneously taken the view that because four new incoming
partners were benamidars registration could not be granted
and he urged that the High Court, having reversed that view,
ought to have held that the assessee was entitled to
registration under s. 26-A of the 1922 Act; and in this
regard counsel pointed out that the position under the 1961
Act is different in view of the Explanation that has been
inserted in s. 185 of that Act but in the absence of any
similar provision in the 1922 Act the position was well
settled that a firm could not be denied registration merely
because some of its partners were benamidars of others and
in that behalf reliance was placed on a decision of this
Court in C.I.T. Gujarat v. A.Abdual Rahir and Co.. 55 I.T.R.
651. Counsel further urged that undue emphasis was laid on
the fact that profits of the previous year ending March 31,
1961 had not been divided or distributed among all the
partners by making requisite entries in the books in the
year of account and registration was wrongly refused on this
basis, though profit and loss account and balance sheet
worked out on loose sheets of papers (which were unsigned)
had been submitted before the authorities; according to
counsel it is not necessary that the requisite entries
pertaining to such division or distribution of profits
172
(or losses, if any) should be made in the books in the
selfsame year of account and statement prepared by way of
profit and loss account and balance sheet for working out
such distribution among the partners should have been
regarded as sufficient evidence of actual division of
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profits and in this behalf counsel relied upon a decision of
the Orissa High Court in Rao & Sons v. C.I.T. Bihar and
Orissa, 58 I.T.R. 685. Further counsel pointed out that such
division or distribution had been by making the relevant
entries in the assessee’s books on the first day of the
following year and books pertaining to the following year
containing such entries were produced before us at the
hearing. In substance counsel’s contentions were that the
refusal to grant registration to the extent that it was
based on the ground that no valid partnership in law had
come into existence was clearly unsustainable, that there
was no evidence to justify the finding on the genuineness of
the appellant firm and that the High Court having held that
registration could not be refused merely on the ground that
some of the partners were benamidars registration ought to
have been granted to the assessee.
On the other hand counsel for the revenue supported the
refusal of registration by contneding that even if a valid
partnership in law could be said to have been brought into
existence by executing the Deed in question it was open to
the taxing authority to refuse registration on the ground
that factually no genuine firm had come into existence
inasmuch as the two grounds were quite distinct from each
other and therefore assuming that some fault could be found
with the finding of the lower authorities on the question of
validity of the appellant firm in law the refusal to grant
registration should not be interfered with as the adverse
finding on the genuineness of the appellant firm, for which
there was ample evidence on record, was sufficient to
justify the order. As regards the reframing of the first
question counsel urged that it is well settled that it is
open to the High Court to reframe or recast a question
formulated by the Tribunal before answering it so as to
being out the real issue between the parties and since in
this case the question No. 1 as formulated by the Tribunal
presumed or assumed the factual existence of the appellant-
firm (which were very much disputed before the taxing
authorities) the High Court reframed it so as to bring into
focus the real issue between the parties namely, whether a
genuine firm had been constituted or not. Further counsel
for the revenue pointed out that the High Court had rightly
observed that the Tribunal had, though in a circuitous
173
manner, taken the view that the appellant firm had not
genuinely come into existence. Counsel agreed that under the
1922 Act no provision similar to the Explanation to sec. 185
of the 1961 Act obtained and further fairly conceded that
the fact that some members were benamidars of others in a
firm could be no bar to the grant of registration as held in
Abdul Rahim & Co. case (supra) but contended that the said
aspect was not decisive of the matter and pointed out, as
held that very decision, that notwithstanding the said fact
the firm must be found to be otherwise genuine and therefore
if the taxing authorities were to record an adverse finding
on the factual genuineness of the firm registration could be
refused. On the point of actual division or distribution of
profits counsel urged that the lower authorities were
justified in not relying on loose sheets indicating the
working of such distribution especially when the sheets were
unsigned and hence unauthentic and the assessee cannot be
allowed to fill the lacuna by producing books for the
following year in the fifth Court. On the aspect of the
genuineness of the firm requisite for the grant of
registration counsel relied upon two old decisions in Haji
Ghulam Rasul-Khuda Baksh v. C.I.T. Punjab, 5 I.T.R. 506 and
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Bafi Zabdul Gafoor and others v. C.I.T.C.P. & U.P., 7 I.T.R.
625 which have been subsequently followed in P.A. Raju
Chettiar and Brothers v. C.I.T. Madras, 17 I.T.R. 51 and
Hiranand Ramsukh v. C.I.T. Hyderabad, 47 I.T.R. 598. Counsel
for the revenue therefore, pressed for the dismissal of the
appeal.
On a consideration of the entire material on record
and on giving our anxious thought to the rival submissions
made by counsel on either side we are of the opinion that in
the ultimate analysis the real controversy in the appeal
centres round the question whether or not factually a
genuine firm had come into existence for the Assessment Year
1961-62 as a result of the execution of the instrument of
partnership on April 1, 1960 and whether for recording a
negative finding thereon against the assessee as done by the
lower authorities there was evidence on the record? This
being the real issue which was not reflected in the first
question formulated by the Tribunal the High Court in our
view was justified in reframing that question. It is true
that the taxing authorities and the Tribunal did go into the
question of the appellant-firm’s validity in law but it
cannot be disputed that the concept of a firm being valid in
law is distinct from its factual genuineness and for the
purpose of granting registration both the aspects are
relevant and must be present and one without
174
the other will be insufficient. In other words, even if a
firm brought into existence by executing an instrument of
partnership deed is shown to possess ail the legal
attributes it would be open to the taxing authority to
refuse registration if it were satisfied that no genuine
firm has been constituted. Moreover, some of the provisions
contained in such instrument may not militate against the
firm’s validity in law but these can be a pointer against
its factual genuineness. The instant case is clearly a case
of that type. For instance, Clause 5 of the Partnership Deed
in question which vests the control and management of the
partnership business in the original two partners and denies
to the four new incoming partners any right in the
management or the affairs of the accounts of the partnership
business may not show lack of the element of mutual agency
but surely has a vital bearing on the factual genuineness of
the firm and read along with other provisions like Clauses
3, 6, 7 and 8 would go a long way to show that the four new
incoming partners were not real partners but were dummies
thus throwing doubt on the genuineness of the firm.
Moreover, the facts that the four new incoming partners were
very close relatives of the two original partners and that
two of them were working as employees in the erstwhile firm
whose services as such were continued in the relevant year
on existing remuneration with such increments as the two
original partners may agree to give cannot be lost sight of.
In addition to these aspects the statements of the four new
incoming partners that were recorded in November 1965
clearly show that they had signed the instrument
mechanically without knowing or reading, much less after
understanding the implications thereof as we shall indicate
presently.
For instance, Hari Singh in his statement has stated
that he was not aware of the profits of the firm in any of
the three accounting years 1960-61, 1961-62 and 1962-63; he
asserted that for the relevant year 1960-61 the profit and
loss account and balance-sheet were prepared in the books
and he had inspected these statements which assertions are
obviously false because admittedly no such profit and loss
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account nor balance sheet was drawn up in the books. When
asked as to whether Pal Singh and Sadhu Singh had consulted
the incoming partners before the Deed was written out and
executed he has emphatically given a negative answer and has
added that they (original partners) called all four of them
and asked them to sign the Deed which they did. Harbans
Singh
175
in his statement admitted that he used to do the work of
painting but could not say how many factories the firm was
running nor did he remember the factory in which he used to
do his work; he further asserted that no witnesses were
called when the Deed was signed which is obviously a false
assertion. Surjit Singh who passed his Intermediate Arts in
September 1960, B.A. in 1963 and LL.B. in 1965 has shown
utter ignorance of even the share ratio in the profit and
loss of the new incoming partners; he stated that he had two
annas share in the profits but no share in the losses; when
questioned as to how he knew that losses were not to be
shared by him he stated that when he was a student of law he
was taught that losses should never be shared; he admitted
that he had never read the deed which clearly shows that he
mechanically signed the document without even attempting to
know what he was signing; he was also ignorant of the fact
whether he had withdrawn his share of profit in the first
year of the partnership, i.e. 1960-61. Gulzar Singh stated
that he was called from the village and was asked to sign
the document which he did without bothering to know its
contents; in fact he admitted that he knew nothing about the
matter. These answers given by the four new incoming
partners clearly go to show that they were not real partners
but mere dummies and the Deed appears to have been executed
merely as a cloak to secure registration and thereby reduce
the tax incidence.
Counsel for the assesee made much of the fact that
profit and loss account and balance sheet prepared on loose
sheets of paper had been submitted before the ITO and
according to him these were wrongly rejected on the ground
that requisite entries in regard to division or distribution
of profits had not been made in the books in the self-same
year of account, which counsel urged, was not necessary. It
must, however, be mentioned that the profit and loss account
statement so prepared on a loose sheet did not contain any
distribution of profits and or allocation thereof to each
one of the new partners but such distribution or allocation
was indicated on a loose paper on which the balance sheet
was prepared but even that loose sheet was an unsigned piece
of paper and therefore, being unauthentic was rightly
rejected by the taxing authority. An attempt was made by
counsel during the hearing of the appeal to produce before
us the books of account pertaining to the following year in
which on the opening day entries showing distribution of the
earlier years’s profit had been made. But the late
production of such books has deprived
176
the taxing authorities an opportunity to make their comments
thereon. Apart from this aspect the question would be
whether even such entries were genuine entries intended to
be acted upon or mere paper entries making a show of
allocation of the share of profits due to each one of these
four new incoming partners and this would require further
investigation into relevant facts. In this context it will
not be out of place to mention that from their statements it
appears clear that none has made any withdrawal towards his
share of profit in any of the three years, 1960-61, 1961-62,
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1962-63 and even after the partnership had alleged to have
been dissolved after 31.3.1963 and at least one of them Hari
Singh stated that a sum of Rs.73,600 became due to him as
his share of profits till dissolution and in spite of demand
nothing had been paid to him till his statement was recorded
in November 1965. Only two of them drew their remuneration
as the employees. Considering their economic position it is
difficult to appreciate that they would have needed no
withdrawal from their share of profits in any year till the
alleged dissolution. This aspect throws considerable doubt
on the point whether or not entries were intended to be
acted upon.
Having regard to the aforesaid discussion it is clear
that there was sufficient material on record on the basis of
which the taxing authorities as well as the Tribunal could
record an adverse finding on the genuineness of the firm
against the assessee and registration in our view was
rightly refused.
We might observe that there was nothing wrong on the
part of the High Court to have confirmed the refusal of
registration to the appellant firm even after holding that
the fact that some members were benamidars of others was no
bar to the grant of registration. In A. Abdul Rahim and
Co.’s case (supra) on which counsel for the assessee relied,
the Tribunal had held that one of the partners who had been
inducted into the erstwhile partnership was a benamidar of
one of the three original partners but had otherwise held
that the partnership was genuine and valid and therefore,
this Court took the view that the mere fact that one member
was a benamidar of another as no bar to the grant of
registration and directed registration but the ratio would
be inapplicable to a case where the firm is otherwise held
to be not a genuine one.
In the result the appeal fails and is dismissed with
costs.
A.P.J. Appeal dismissed.
177