LexCOMMISSIONER OF INCOME TAX, ANDHRA PRADESH versus B. POSETTY AND CO.
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A COMMISSIONER OF INCOME TAX, ANDHRA PRADESH B v. B. POSETTY AND CO. NOVEMBER 5, 1996 [A.M. AHMADI, CJ. K.S. PARIPOORNAN AND SUJATA V.MANOHAR,JJ.) Income Tax Act, 1961-Section 184-Registration of firm-Sub Partnership-Entitlement to registration-Held, main firm and sub- partnership are distinct and different entities-Hence registration cannot C be refased. Andhra Pradesh (Telengana Area) Abkari Act-Section 14- Registration ofSub-Partnershjp under the Income Tax Act-Whether could be denied on the ground that sub-partnership contravened Section 14- D Held, No, since either the sub-partnership or any partner thereof become partner in the main firm. M/s. N. was a firm which was granted registration under the Income Tax Act. Respondent found it difficult to contribute the required capital for the share in the firm, a new sub-partnership was E formed to provide requisite finance to the main firm, and it filed an application for registration for the assessment year 1966-67. The Income Tax Officer refused registration to sub-partnership firm on !he ground that it contravened the provisions of Section 14 of the Abkari Act and so void and unenforceable. It was confirmed in appeal. On appeal the Tribunal and the High Court allowed registration of F the sub-partnership firm. G In this appeal preferred by the Revenue, the sole question that arose for consideration was whether the sub-partnership contravened Section 14 of the Abkari Act. Dismissing the appeal, this Court HELD : l. The sub-partnership is a distinct and different firm. It is one recognised by law and it is not a partnership with the main firm. It will not have the effect of making the partner in the sub- H partnership, partner of the main firm. Hence it cannot be said that 452 1 COMMNR. OF INCOME TAX v. B. POSETTY AND CO. 453 either the sub-partnership or any of its partner became a partner of A the main firm. The inhibition contained in Section 14 of the Abkari Act will apply only in a case where the lessee declares any person as its partner. Here the lessee had not declared either the sub partnership or any other person as its partner. [462 D-F] 2. The sub partnership financed one of its partner to make a B capital investment in the main firm. Such an arrangement of agreement between persons who formed a distinct and different firm is valid in law and to such a situation Section 14 of the Abkari Act is not attracted, nor is there any basis to hold that there was any contravention of the provisions of the said Act. Registration cannot be refused to the sub partnership on the ground that one of the C partners of the main firm had agreed to show the profit received by him from the main firm with stranger or strangers. It does not affect main firm or its partners in any way. Section 14 of the Abkari Act has no application to such a situation. [462 G,H] Additional Commissioner of Income Tax, v. Degaon Ganj Reddy G. D Ramakrishna and Co. and others, (1995) 214 ITR 650 and Murlidhar Himattsingka v. CIT, (62) !TR 323, relied on. Bihari/al v. CIT, (217) ITR 7 46, distinguished. Addi. Income Tax Commissioner, Hyd. v. D.G.G. Ramakrishna and E Co., 1 (1977) TLR 244=111 ITR 93, referred to. S.T. Desai: Law of Partnership in India (6" Edn) p. 152, referred to. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1209 of 1978. From the Judgment and Order dated 22.8.77 of the Andhra Pradesh High Court in C.R. No. 45 of 1975. J. Ramamurthy and S.N. Terdol for the Appellant. V.A. Bobde for the Respondent. The Judgment of the Court was delivered by F G H 454 SUPREME COURT REPORTS [I 996] SUPP. 8 S.C.R. A PARIPOORNAN, J. 1. The Revenue has tiled this appeal against the judgment of the High Court of Andhra Pradesh dated 22.8.1977 rendered in Case Referred No.45 of 1975. The High Court granted a certificate under Section 261 of the Income Tax Act to appeal to this Court, in S.C.L. Petition No. 57 of 1978. The assessee is the respondent in this appeal. B Since the respondent (assessee) was not represented, we requested c Sri V.A. Bobde (senior counsel) to assist us. We heard counsel for the Revenue Sri. J. Ramamurthy and Sri. V.A. Bobde. 2. The short question involved in this Appeal is:- Whether the respondent-assessee firm is entitled to registration under Income Tax Act for the year 1966-67? The Income Tali Officer by his order passed under Section 185 of the Income-Tax Act, 1961, dated 28.12.1970, held th
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