1. The assessed in the present reference is a partnership firm M/s. Central India Corporation, which was constituted by a deed dated April 29, 1961, for doing business in goat and sheep skins. The terms of the partnership was for three years commencing from April 1, 1961. The business of the firm, however, continued to be carried on till January 16, 1969. The firm was granted registration under the I.T. Act not only for the assessment years up to 1964-65, but also for the subsequent years up to 1968-69, although the terms fixed by the partnership deed had expired in those years.
2. The Additional Commissioner of Income-tax, Delhi-II, passed an order under s. 263 of the I.T. Act, 1961, canceling continuation of the registration for the assessment year 1968-69. He was of the opinion that the ITO was not right in law in continuing the registration and, accordingly, he directed the ITO to treat the assessed as an unregistered firm for the year 1968-69.
3. There was an appeal to the Tribunal, which was accepted. There Tribunal was of the view that the conditions set out in s. 184(7) of the I.T. Act, 1961, were fulfillled and hence the registration could not be discontinued. Inter alia, it was held that the identity of the firm was the same as before, the shares of the partners were not altered, and hence, the ITO's order continuing the registration was not wrong or invalid. In the course of e discussion in the order, it was pointed out that there was a difference between the renewal of registration under s. 26A of the Indian I.T. Act, 1922, and the continuation of registration under the new Act.
4. Now, at the instance of the Addl. Commissioner, the following questions have been referred to us :
'1. Whether, on the facts and in the circumstances of the case, the assessed-firm was entitled to continuation of registration for the assessment year 1968-69
2. Whether, on the facts and in the circumstance of the case, the Additional Commissioner of Income-tax was justified in canceling the Income-tax Officers order continuation registration of the firm for the assessment year 1968-69 and directing the Income-tax Officer to treat the firm as an unregistered firm ?'
5. Learned counsel for the Commissioner has relied on certain observation in S. P. Pandey and Brothers v. CIT : 96ITR515(Patna) , to contend that it was held there, that if the term of partnership fixed by the deed had expired, then the old partnership is not continued for the purpose of the I.T. Act, although the partnership could continue under s. 17(b) of the Indian Partnership Act even without a fresh deed. Reliance was also placed on Nawab & Brothers v. CIT : 124ITR307(MP) , where it was had that if a partners retires and no new partnership deed is drawn up, when a renewal cannot be granted. Lastly, reference was made to Durgaprasad Rajaram Adatiya v. CIT : 134ITR601(MP) , wherein it was held that if a minor became a partner on attaining majority and there was no fresh partnership deed, then the firm could not be registered.
6. We are of the view that these judgment are not applicable to the questions which have arisen in the present case. The observation in the Patna case were obiter, and have been distinguished in a similar case as the one before us, but the Punjab and Haryana High Court. The other two judgments are concerned with the effect of s. 184(7) of the Act.
7. We are clearly of the view that the provisions of e present Act require that the registration should be renewed unless the conditions provided in s. 184(7) are not fulfillled.
8. It is now necessary to repeat the relevant provisions of reference. The sub-section, viz., s. 184(7), as it stood at the relevant time, read as follows:
'Where registration is granted to any firm for any assessment year, it shall have effect for every subsequently assessment year:
Provided that -
(i) there is no change in the constitution of the firm or the share of the partners as evidence by the instrument of partnership on the basis of which the registration was granted; and
(ii) the firm finishes, along with its return of income for the assessment years concerned, a declaration to that effect, in the prescribed form and verified in the prescribed manner.'
9. The provision show that only two conditions are necessary for a continuation of the registration - (a) that there should be no change in the constitution of the firm, or (b) the shares of the partners as evidenced by the original partnership deed. Now, it can happen that though the term of the partnership has expired as per the deed, still the firm may continue to operate. This is specifically provided for by s. 17(b) of the Indian Partnership Act. Also, s. 42 shows that a dissolution of a firm constituted for a fixed terms is subject to contract between the partners. This means that even if there is a contract providing for dissolution on a particular date, that term of the partnership is subject to further contract between the parties. The parties may agree to continue the period or continue the partnership in some other way even after the specified date of dissolution. Thus, there is district possibility of the firm being carried on even after the specified dissolution dated either because s. 17(b) of the Partnership Act provides for it or, because the parties mutually agreed that the partnership should continue notwithstanding the expiry of the fixed term.
10. The provisions of the I.T. Act, 1961, as they now stand, require that registration should be continued if the conditions provided by s. 184(7) are satisfied. They were satisfied in this case, and, thereforee, there was no way in which the registration could come to as end. Even the declaration which has to be in Form No. 12 appended to the I.T. Rules, 1962, shows that all that is required is a statement that the constitution of the firm has not changed and the shares of the partners remain the same.
11. This view of the law that we have taken has also been taken in CIT v. Standard Plastic Industries , by the Punjab and Haryana High court. We asked learned counsel as to how the registration could not be renewed in view of the express terms of s. 184(7). He submitted that there has to be a written partnership deed and if the old deed ceases to operate, then the conditions are not satisfied. We do not find this to be so under s. 184(7). All that the provision states is that the constitution of the firm and the shares of the partners as evidenced by the partnership deed on the basis of which the registration was granted should not have altered. It does not stated that the same deed must continue to operate. Undoubtedly, the position under the old Act was that there had to be renewal of registration every year, so there has to be a written partnership in force. But, that is not so under the present Act. The present Act requires the original partnership to be by a written partnership deed, but the renewal is on the basis that the same firm continues. This continuation comes about, because the firm actually continues and a declaration is filed to that effect. If the declaration is erroneous, or any other defect can be found therein, then the ITO can act under the provision of s. 185 to point out the defect and given one months time to rectify the same, of he can cancel the registration under s. 185, after giving notice to the firm. But, even for canceling the registration, if has to be established that the is no genuine firm in existence. Then there is s. 187 which sets that if there is a change in the constitution of the firm then the fir as constituted at the time of making the assessment has to be assessed.
12. There is no provisions in the Act which provides that if the term fixed by the partnership deed has expired then e registration cannot be continued. We, thereforee, uphold the decision of the Tribunal.
13. The result will be that we answer question No. 1 in affirmative to hold that the firm was entitled to a continuation of registration and we answer question No. 2 in the negative by holding that the Addl. Commissioner was not justified in canceling the ITO's order continuing the registration.
14. As the question has arisen because of the alternation made in the I.T. Act, 1961, as compared with the Act of 1922, we consider that we should leave the parties to bear their own costs. We order accordingly.