C.P. Sen, J.
1. This is a reference under Section 256(1) of the Income-tax Act, 1961, by the Tribunal for opinion of this court on the following question:
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that no fresh partnership deed is necessary when a minor attains majority and consequently in cancelling the order passed by the Commissioner of Income-tax under Section 263 of the Act ?'
2. The assessee was allowed registration under Section 185 of the Income-tax Act, 1961, on the strength of a partnership deed executed on January 5, 1973. According to the deed, Premanand and Dwarkadas being minors were admitted to the benefits of the partnership. For the assessment year 1975-76, accounting year ending Diwali 1974, the assessee filed declaration in Form No. 12 seeking continuation of registration of the firm. On the basis of this declaration, the Income-tax Officer allowedcontinuation of registration to the assessee-firm. The assessment records were examined by the Commissioner of Income-tax who found that during the accounting year relevant to the assessessment year 1975-76, two minors who were admitted to the benefits of the partnership became majors on March 9, 1974, and April 13, 1974. According to the Commissioner, the partnership deed did not specify how the losses of the firm would be shared by the partners when the minors attain majority. He was of the view that there was a change in the shares of partners in regard to the sharing of losses of the partnership business, but to give effect to this change no fresh partnership deed was executed. The Commissioner, therefore, held that, in these circumstances, the order passed by the Income-tax Officer allowing continuation of registration to the firm for the assessment year 1975-76 was erroneous and prejudicial to the interests of the revenue and action under Section 263 of the Act was called for. He, therefore, set aside the assessment order dated April 5, 1976, passed by the Income-tax Officer and directed him to make a fresh assessment according to law, after giving an opportunity to the assessee to produce evidence in support of the contention which may be raised in the course of such proceeding. Against this order, the assessee filed an appeal before the Income-tax Tribunal. During the course of the hearing, the assessee referred to the instructions issued by the Central Board of Direct Taxes; vide its letter No. F/ 76/l/67-IT-A(ii), dated March 20, 1969, wherein instructions were issued to the officers of the Income-tax Department that while there is no doubt about the genuineness of a partnership, the claim of continuation of registration should not be refused simply because a minor previously admitted to the benefits of the partnership has been made a full-fledged partner on attaining majority and no new partnership deed has been drawn up to give effect to this change. The Board was of the opinion that the view taken by the Allahabad High Court is a narrow view of the law but this direction has not to be given effect to within the jurisdiction of the Allahabad High Court. The Tribunal found that there was no dispute about the genuineness of the firm and, therefore, the circular of the Board referred to above applied to the facts of the case and should have been followed. Therefore, the order of the Commissioner has been set aside. Aggrieved by this order, the Commissioner moved the Tribunal for making this reference.
3. The matter is concluded by three decisions of this court, first being Durgaprasad Rajaram Adatiya v. CIT : 134ITR601(MP) wherein it has been held, Firm--Change in constitution--Minors, admitted to benefits of partnership, attaining majority--Partnership deed not providing for sharing of losses when minor attains majority--Change in constitution of firm occurs--Firm not entitled to continuation of registration. In the secondcase, i.e., in CIT v. Durgaprasad Rajaram Adatiya : 146ITR580(MP) the same view has been taken. In the third case, i.e., CIT v. Chopda Trading Co. of the same volume at page 583, it has been held : Firm--Continuance of registration--Minor admitted to benefits of partnership attaining majority--No fresh deed executed--Continuation of registration can be refused where the deed does not provide for distribution of profits and losses on minor attaining majority--Tribunal holding that continuance of registration cannot be refused merely on ground that minor admitted to benefits of partnership became major and no fresh deed executed--Tribunal not examining question from correct point of view. In the present case, the partnership deed mentions that on the minors attaining majority, they are free to elect whether to remain partners or not in which case they will make a declaration. No new deed will be executed and a supplementary deed will be executed to show the change in the profit-sharing ratio of partners. The profit or loss, as the case may be, shall be ascertained and allocated amongst the partners to their respective shares. It was stated by the assessee before the Commissioner that the two minors on attaining majority elected to continue as partners and were liable to share the losses of the partnership firm but their shares were not mentioned and though they stated that a supplementary deed was executed, no documents were produced.
4. In view of the aforesaid decisions of this court, we are of the opinion that the Tribunal was not justified in holding that no fresh partnership deed is necessary when a minor attains majority and consequently in cancelling the order passed by the Commissioner of Income-tax under Section 263 of the Act.