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Outdoor Publicity Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Cochin
Decided On
Judge
Reported in(1986)15ITD116(Coch.)
AppellantOutdoor Publicity
Respondentincome-tax Officer
Excerpt:
.....in the losses in the instrument of partnership. in the absence of specification of shares in the losses registration cannot be granted.similar view was taken by the kerala high court in united hardwares v.cit [1974] 96 itr 348 and cit v. ithappiri and george [1973] 88 itr 332. we respectfully follow the above decisions and hold that the assessee is not entitled for registration as there is no specification of shares of losses in the partnership deed. the deed of agreement dated 27-3-1980 has been executed after the close of the accounting years for these two assessment years. hence, that will not govern these two assessment years. in n.t. patel & co.'s case (supra) there was no specification of the shares of the partners in the deed dated 31-3-1949. after the close of the.....
Judgment:
1. The dispute in these appeals for the assessment years 1978-79 and 1979-80 is with regard to the registration of the firm. In the partnership deed dated 28-7-1977 the ratio of the sharing of the profits by the partners has been given, but there is no clause with regard to the sharing of the losses. Before the ITO the assessee filed a deed of agreement dated 27-3-1980 wherein the ratio of sharing the losses was shown. The ITO did not accept the agreement. He held that as the partnership deed dated 28-7-1977 does not specify the sharing of the losses the assessee-firm is not entitled for registration. Thus, he refused registration to the assessee-firm for the two years.

2. On appeal, the AAC upheld the same. Against this, the assessee has preferred these appeals. The learned counsel for the assessee relying on the decision of the Supreme Court in the case of Mandyala Govindu & Co. v. CiT [1976] 102 ITR 1 submitted that it should be presumed that the losses will be borne in the same ratio of sharing the profits. He also urged that in order to clarify the position the deed of agreement dated 27-3-1980 has been executed and in view of this registration should be granted. The departmental representative strongly urged that the decision of the Supreme Court in Mandyala Govindu & Co.'s case (supra) does not help the assessee ; whereas the decision of the Kerala High Court in CIT v. Best Automobiles [1979] 117 ITR 877 is against the assessee. Once the sharing of the losses is not specified the assessee is not entitled for registration. With regard to the agreement dated 27-3-1980 he submitted that it has been executed after the accounting year. Hence, it cannot be taken into account for these two assessment years. He placed reliance on a decision in the case of N.T. Patel & Co.

v. CIT [1961] 42 ITR 224 (SC).

3. We have considered the rival submissions. Admittedly, in the partnership deed dated 28-7-1977 the sharing of the loss by the partners has not been specified. Under Section 184 of the Income-tax Act, 1961, an application for registration in the prescribed form should be made to the ITO evidencing the instrument of partnership and specifying the individual shares of the partners in that instrument.

Form No. 11 is the form prescribed for submitting the application. In that form column 6 of the Schedule refers to the percentage of share in the profits or losses. Thus, the specification of shares in the losses in the partnership is necessary for granting registration. In Best Automobiles' case (supra), the Kerala High Court has, after referring to the decision of the Supreme Court in the case of Mandyala Govindu & Co. (supra) held that there must be specification of shares in the losses in the instrument of partnership. In the absence of specification of shares in the losses registration cannot be granted.

Similar view was taken by the Kerala High Court in United Hardwares v.CIT [1974] 96 ITR 348 and CIT v. Ithappiri and George [1973] 88 ITR 332. We respectfully follow the above decisions and hold that the assessee is not entitled for registration as there is no specification of shares of losses in the partnership deed. The deed of agreement dated 27-3-1980 has been executed after the close of the accounting years for these two assessment years. Hence, that will not govern these two assessment years. In N.T. Patel & Co.'s case (supra) there was no specification of the shares of the partners in the deed dated 31-3-1949. After the close of the accounting year a deed of rectification was executed on 17-9-1955. On those facts, the Supreme Court held that the partnership deed dated 31-3-1949 did not specify the shares and that condition was fulfilled by the deed of rectification dated 17-9-1955. The Supreme Court held that the assessee is not entitled for registration as there is no specification of the shares of the partners in the partnership deed dated 31-3-1949. The contention that the rectification deed dated 17-9-1955 clarifies the position and registration should be granted was not accepted. The above ratio equally applies to the instant case. Thus, the deed of agreement dated 27-3-1980, executed after the close of the accounting years cannot be taken into account for these two assessment years, and that will not govern the two years. The decision of the Supreme Court in Mandyala Govindu & Co.'s case (supra) does not help the assessee as the point relating to the specification of shares in the losses in the partnership deed was not decided though the conflict of view on that was noticed. That decision was considered by the Kerala High Court in Best Automobiles'' case (supra). Thus, in our view, the assessee is not entitled for registration as there is no specification of shares in the losses in the partnership deed. We uphold the order of the AAC.


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