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Makhbu Lal Ayodhya Prasad Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 149 of 1975
Judge
Reported in(1979)13CTR(All)173; [1979]120ITR346(All)
ActsIncome Tax Act, 1961 - Sections 184(7)
AppellantMakhbu Lal Ayodhya Prasad
RespondentCommissioner of Income-tax
Appellant AdvocateR.K. Gulati, Adv.
Respondent AdvocateAshok Gupta, Adv.
Excerpt:
- .....attaining majority. in case an instrument of partnership takes care of the changed situation, the firm is entitled to the continuance of registration but not otherwise. as regards wajid ali's case [1972] uptc 532 , it was held that the assessments should be made, one for the period up to which the minority existed and the other for the period subsequent thereto.3. mr. ashok gupta, appearing for the department, made an impassionate attempt to establish that the decision of the full bench requires reconsideration. we were informed that the department has taken up the matter in appeal before the supreme court which is receiving consideration there. as at present advised, we do not think that the full bench decision requires prompt reconsideration. we, accordingly, abide by that decision.4......
Judgment:

C.S.P. Singh, J.

1. The assessee-firm consisted of 5 partners with two minors admitted to its benefits, being constituted by a deed of partnership dated 29th October, 1965. The minors were Sri Krishna Chandra and Sri Manoj Kumar. The present reference is concerned with the assessment year 1968-69 for which the relevant accounting period ended on 12th November, 1967. Krishna Chandra, one of the two minors, became major on 12th February, 1967, that is, after a part of the previous year was over. He elected to remain a partner of the firm. No fresh deed of partnership was drawn after Krishna Chandra had attained majority and the assessee claimed renewal of registration on the basis of the old deed. The ITO allowed renewal. Subsequently, the ITO, in view of the decision of this court in the case of Ganesh Lal Laxmi Narain v. CIT : [1968]68ITR696(All) , took the view that the renewal was wrongly granted and as such referred the matter to the Addl. CIT for cancellation of the registration granted earlier. The Additional Commissioner cancelled the registration and directed the ITO to treat the assessee as an unregistered firm. On appeal, the Tribunal upheld the order cancelling the registration. It also took the view that the assessee was not entitled to the benefit of registration even for that part of the previous year during which Krishna Chandra continued to be a minor. In taking this view the Tribunal drew support from the decision of this court in CIT v. Wajid Ali Abid Ali [1972] UPTC 532 . At the instance of the assessee, the Tribunal has referred the following two questions for our opinion :

' (1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that there occurred a change in the constitution of the assessee-firm on 12-2-1967 when the minor, Sri Krishna Chandra, attained majority and elected to become a full fledged partner and, therefore, the assessee was not entitled to the benefit of continuance of registration on the basis of a deed of partnership drawn on 29-10-1965 ?

(2) Whether, on the facts and in the circumstances of the case, theTribunal was justified in holding that the assessee was not entitled to thebenefit of continuance of registration under Section 184(7) of the Income-tax Act, 1961, up to 12-2-1967, i.e., the date on which the minor, ShriKrishna Chandra, attained majority and elected to become a full-fledgedpartner '

2. Both the decisions, that is, in Ganesh Lal's case : [1968]68ITR696(All) and Wajid Ali's case [1972] UPTC 532, now stand overruled by the Full Bench decision of this court in the case of Badri Narain Kashi Prasad v. Addl. CIT : [1978]115ITR858(All) . It has been held that a change in the constitution of the firm does not take place in every case where a minor becomes major. The ITO has to examine the instrument of partnership and decide as to whether the instrument as executed earlier provides for the contingency of a minor becoming major and details the shares of the minors on attaining majority. In case an instrument of partnership takes care of the changed situation, the firm is entitled to the continuance of registration but not otherwise. As regards Wajid Ali's case [1972] UPTC 532 , it was held that the assessments should be made, one for the period up to which the minority existed and the other for the period subsequent thereto.

3. Mr. Ashok Gupta, appearing for the department, made an impassionate attempt to establish that the decision of the Full Bench requires reconsideration. We were informed that the department has taken up the matter in appeal before the Supreme Court which is receiving consideration there. As at present advised, we do not think that the Full Bench decision requires prompt reconsideration. We, accordingly, abide by that decision.

4. We, accordingly, answer the first question in the negative, but the Tribunal should reconsider the question of change in the constitution of the firm in the light of the principles laid down by the Full Bench in Badri Narain's case : [1978]115ITR858(All) . The second question is also answered in the negative. The assesses is entitled to costs which is assessed at Rs. 125.


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