' G. P. SINGH, C. J.-This is a reference made by the Income-tax Appellate Tribunal referring for our answer the following question of law : "Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in directing the Income-tax Officer to allow registration to the assessee?"
2. The reference relates to the assessment years 1971at72 and 1972-73. The assessee firm was constituted by a deed of partnership executed on 10-11-1961 and it consisted of four partners and three minors were admitted to the benefits of the partnership. The minors attained majority on 4th May, 1966, 27th May, 1967 and 21st July, 1971 respectively and elected to become partners. The partnership was not granted continuation of registration for the assessment years 1967-68, 1968- 69 and 1969-70. There was a reference to this Court in iespect of these assessment years. The judgment of the Court in this reference is rept,rted as Durgaprasad Rajaram Aratiya v. C. I T. (I) It was held that as the instrument of partnership did not provide as to how the losses would be distributed after each minor became major and elected to become a partner, the partnership could not be granted continuation of registration. In the normal course following that decision we should hold that the Tribunal was in error in granting continuation of registration for the assessm ent years 1971-72 and 1972-73. The Tribunal has, however, relied upon two Circulars ; one issued by the Central Board of Revenue and the other by the Central Board of Direct Taxes. The first Circular is dated 3-1-1962. It is to the effect that where there is no doubt about the genuineness of the partnership, registration need not be refused simply because a minor previously admitted to the benefit 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 second Circular is dated 20-3-1969. It is stated therein that the Board is of opinion that the view taken by the Allahabad High Court is a narrow view of the law and the claim of continuation is not to be refused simply because a minor previously admitted to the benefits of 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 if the firm is otherwise genuine. The view then held by the Allababad High Court was that in every case whenever a minor admitted to the benefits of a partnership attains majority and elects to be a partner of the firm, there is a change in the constitution of the firm and the partnership is not entitled to continuation of registration. This view was taken in Ganesh La!
Laxmi Narain v. C.I.T. (2) and Ram Narain Laxman Prasad v. I. T.
0. (3). {{FOOT NOTE}}
(1) (1982) 134 I T R 601 :1981 Tax L R 851
(2) (1968) 68 I T R 696 (All.) (3) (1972) 84 I T R 233 (All,) {{FOOT NOTE}} It was to get over this view that the Board issued the second Circular of 1969. The view taken by the Allahabad High Court in these cases was overruled by a Full Bench in Badri Narain Kashi Pd. v.
Additional C. I. T. (1). The view of the Full Bench is that if the deed of partnership envisages the eventuality of the minor becoming a full-fledged partner on attaining majority and provides for the distribution of profits and losses in that event, there would be no change in the constitution of the firm and the partnership would be entitled to continuation of registration. It is this view, which our High Court followed in Ganesh Rice Mills v. C. I. T. (2) and Durgaprasad Rajaram Arativa v. C. I. T'.
(supra). According to the view that now prevails, continuation of registration cannot be refused simply on the ground that a minor admitted to the benefits of the partnership has become a partner on attaining majority. It will be refused on the ground that the eventuality of the minor becoming a partner on attaining majority was not foreseen in the deed of partnership and it does not provide for the distribution of profits and losses on the minor attaining majority. This view does not go counter to Circulars issued by the Board. The Circulars emphasized that continuation of registration should not be refused simply because minor previously admitted to the benefits of the partnership has been made a full-fledged partner, and departed from the view which was then held by the Allahabad High Court but which now stands overruled by the Full Bench. The circulars do not provide anything contrary to the view of the Full Bench of the Allahabad High Court which this High Court has followed in the two cases mentioned above.
3. Now in the instant case, the continuation of registration has to be refused not simply on the ground that minors admitted to the benefits of the partnership have become full-fledged partners on attaining majority but on the ground that the partnership deed does not provide for such an eventuality and does not specify the shares of the partners in losses after the minors A became partners on attaining majority. It was on this basis that the refusal of continuation of registration was upheld in the reference relating to the same firm for the assessment years 1967-68, 1968-69 and 1969-70. The same view must be taken in this reference which relates to the assessment years 1971-72 and 1972-73.
4. For the reasons given above, we answer the question as follows : "The Income tax Appellate Tribunal was not justified in law in directing the Income-tax Officer to allow continuation of registration."
There will be no order as to costs of this reference. {{FOOT NOTE}}
(1) (1978) 115 I T R 858 : 1978 Tax L R 807 (All.) (1981) 132 I T R 257 : 1982 Tax L R 603 (Madh. Pra) {{FOOT NOTE}}