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H.N. Nirvane Gowda and Sons Vs. Commissioner of Agrl. Income-tax, Karnataka - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberCivil Revision Petition Nos. 994 and 995 of 1981
Judge
Reported in[1984]148ITR382(KAR); [1984]148ITR382(Karn)
ActsKarnataka Agriculture Income Tax Act, 1957 - Sections 29; Income Tax Act 1961 - Sections 184(7)
AppellantH.N. Nirvane Gowda and Sons
RespondentCommissioner of Agrl. Income-tax, Karnataka
Appellant AdvocateS.G. Shivaram, Adv.
Respondent AdvocateBhoopathy, Adv.
Excerpt:
- code of civil procedure, 1908. order 47 rule 1: [v. jagannathan, j] review of judgment and decree in regular second appeal position of an illegitimate son coparcenary properties ruling in the case of smt. sarojamma v smt. neelamma, [reported in ilr 2005 (3) kar 3293; 2005 (5) klj 66; 2005 (3) kccr 2053; 2005 air kar r 1894; air 2005 noc 422; 2006 (1) civil l.j. 145] consideration of held, one of the grounds for seeking review is that there is an error apparent on the face of the record and not an erroneous decision on facts, held, an error on a point of law is apparent on the face of the judgment with regard to the entitlement of an illegitimate child to a share in the property of his father, irrespective of the nature of the property. hence, the matter requires to be reviewed...........of registration by the agrl. ito. the assesses-firm consists of six partners and is evidenced by a deed of partnership, dated may 21, 1973. clause (4) of the partnership deed reads : 'admission of minors. - h. n. nanjegowda, h. n. swamy, h. n. ravi kumar and kumar h. n. chadrakala are admitted only to the benefits of the firm. they shall be entitled to the profits shall not be liable for the losses, if any. the minors may elect to become full-fledged partners after attaining majority.' 3. clauses(5) provides for sharing of profits. during the previous year relating to the assessment year 1977-78, one of the minor partners, h. n. nanjegowda, attained majority and elected to become a full-fledged partner as per clause (4) of the partnership deed. 4. in the assessment year 1977-78, the firm.....
Judgment:

Rajasekhara Murthy, J.

1. These two revision petitions arise out of the common order, dated February 18, 1981, passed by the Commissioner of Agricultural Income-tax under s. 35 of the Karnataka Agricultural Income-tax Act, 1957.

2. The petitioner-assesses is a partnership firm owning coffee estates. For the assessment years 1977-78 and 1978-79, the assessee was granted renewal of registration by the Agrl. ITO. The assesses-firm consists of six partners and is evidenced by a deed of partnership, dated May 21, 1973. Clause (4) of the Partnership deed reads :

'Admission of minors. - H. N. Nanjegowda, H. N. Swamy, H. N. Ravi kumar and Kumar H. N. Chadrakala are admitted only to the benefits of the firm. They shall be entitled to the profits shall not be liable for the losses, if any. The minors may elect to become full-fledged partners after attaining majority.'

3. Clauses(5) provides for sharing of profits. During the previous year relating to the assessment year 1977-78, one of the minor partners, H. N. Nanjegowda, attained majority and elected to become a full-fledged partner as per clause (4) of the partnership deed.

4. In the assessment year 1977-78, the firm made an application signed by all the major partners including H. N. Nanjegowda, for renewal of registration under s. 29 of the Act to the Agrl. ITO, and was granted renewal as prayed for. So also for the year 1978-79, the renewal was granted.

5. The Commissioner thereupon initiated action under s. 35 of the Act and set aside the orders of the Agrl. ITO granting registration for the two years in question and directed the assessing officer to redo the assessment for the said two years in the status of an unregistered firm. The Commissioner was of the opinion that when the minor partner attained majority, there was a change in the constitution of the firm and that should be evidenced by a fresh deed of partnership. In support of this conclusion the Commissioner relied upon the decision of the Allahabad High Court in Ganesh Lal Laxmi Narain v. CIT : [1968]68ITR696(All) .

6. The question to be considered is, whether there was a change in the constitution of the firm when the minor partner attained majority and continued as a full-fledged partner

7. At the outset it is necessary to point out that the decision of the Allahabad High Court relied upon by the Commissioner has since been overruled by the same High Court in Badri Narain Kashi Prasad v. Addl. CIT : [1978]115ITR858(All) . In fact, that decision was overruled even before the Commissioner made the order concerned in these petitions. It is unfortunate that that fact was not noticed by the Commissioner when he passed the order.

8. The Full Bench, overruling the earlier decision relied upon by the Commissioner, has held (p. 871) :

'Where a minor admitted to the benefits of a partnership attains majority, and elects to be a partner of the firm, there is no change in the constitution of the firm, but there is a change in the shares of the partners. In case the original instrument of partnership evidences this change, the firm is entitled to continuance of registration under s. 184(7) of the Act.'

9. With respect, we entirely agree with this view. In the original instruments of partnership deed it was provided that a minor who is admitted to the benefits of partnership can elect to become a full-fledged partner on attaining majority. It is not in dispute that in this case one of the minors who attained majority has elected to become a full-fledged partner and to continue as such getting the same share which he was entitled to hitherto. The only difference is that he would be liable to share the loss also proportionately. That would be an inevitable consequence when he elects to become a full-fledged partner. When the terms of the deed provide for the minor to exercise his option to continue as full-fledged partner, we do not think there was necessity to have a new deed of partnership.

10. What is brought about from the above events is a change in sharing the losses by the partners and not in the constitution of the firm or in the ratio of profits. The view taken by the Commissioner that a new partnership came into existence is erroneous and his order is liable to be set aside.

11. In the result, the revision, petitions are allowed and the orders passed by the Commissioner are set aside and the orders of the Agrl. ITO granting renewal of registration are restored.

12. The petitioner is entitled to costs.


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