Compilations of case law: STATUS OF ASSESSEE ; PARTNERSHIP FIRM

PARTNERSHIP FIRM

Firm is not an independent entity – Partners are real owners of assets of firm.
N. Khadervali Saheb & Anr. v. N. Gudu Sahib (Decd) & Ors. (SC) 261 ITR 1

Dissolution of firm on death of one of the partners .
Dahi Laxmi Dal Factory Vs CIT & Anr. (All) 103 ITR 517
Narayanan Chettiar Vs Umayal Achi AIR 1959 Mad 283
CIT Vs Seth Govindram Sugar Mills (SC) 57 ITR 510
Mavukkarai (N) Estate Tea Factory Vs Addl. CIT (Mad) 112 ITR 715
CIT Vs Sukh Dayal Sobh Raj (All) 218 ITR 309
CIT Vs Sherally Meherally and Sons (Bom) 230 ITR 120
ITO Vs Kalyan Das Madan Mohan (All) 230 ITR 191
CIT Vs Madhavdas Lalchand (Mad) 230 ITR 877
Nandlal Sohanlal Vs CIT (P & H) 110 ITR 170
CIT Vs Surya Bhagavan Vastralayam (AP) 227 ITR 304

For transferring immovable property by a firm to its partners, registered document is necessary.
CIT Vs Dadha & Co. (Mad) 142 ITR 792
CIT Vs Palaniappa Enterprises (Mad) 234 ITR 635
Jansons Vs CIT (Kar) 154 ITR 432
Ram Narain & Brothers Vs CIT (All) 73 ITR 423
S.N. Syed Mohammed Saheb & Bros. Vs CIT (Ker) 68 ITR 791

For transferring immovable property by a firm to its partners, registered document is not necessary.
Sunil Siddharthbhai Vs CIT (SC) 156 ITR 509

When individual property is converted to partnership property, there is transfer of property.
Addl. CIT Vs M.A.J. Vasanaik (Kar) 116 ITR 110

Firm dissolved on death of a partner- two assessments to be made
CIT Vs Ayyanarappan & Co. & Anr. (SC) 236 ITR 410

A partner in a firm cannot be employee of that firm.
S. Magnas Vs CIT (Bom) 33 ITR 538

144 Order –Firm assessed as AOP – No interest / salary to partners allowed.
Rama Boiled Modern Rice Mill Vs ITO (ITAT, Hyd) 97 ITD 379

Interest paid to partners u/s.40(b) – calculate in Reducing Balance method.
Architectural Associates Vs ACIT (ITAT, Hyd) 92 ITD 479

Interest to partners disallowed u/s 40(b) eventhough firm purchased goods from proprietary concern of partner and interest pertains to outstanding balance in that account.
Shakuntala Industries Vs CIT (Raj) 216 ITR 507

Interest paid to partner – claim that transactions carried out through partner's bank account and that interest actually paid to bank – No material to support claim – disallowance justified.
CIT Vs Thulasidhar & Co. (Mad) 229 ITR 425

A deity cannot be a partner of a valid partnership firm
Ramakrishna Chit Fund Co. Vs ITO (ITAT, Hyd) 106 ITD 350
Gift entries made in books to circumvent 40(b) provisions and interest paid to family members of partners – Transaction not genuine – interest disallowed u/s 40(b)
Auto Sales Vs CIT (All) 227 ITR 790

Minors admitted as full partners – Partnership deed not signed by guardians of minors – No valid partnership.
Kumar Financing Corpn. Vs CIT (Cal) 122 ITR 192
Addl. CIT Vs Uttam Kumar Pramod Kumar (All) 115 ITR 796
CIT Vs Khetan & Co. (Cal) 45 ITR 170

Adult admitted to benefits of partnership – No valid partnership
CIT Vs B. Pandiah & Co. (AP) 143 ITR 464
CIT Vs Shankar Cottons (Mad) 222 ITR 445
CIT Vs J.B. Coal Traders (Patna) 164 ITR 450

Deed not specifying share of one partner – No valid partnership
K.S. Badrinarayana Rao Vs CIT (Kar) 152 ITR 159

On the date of execution of partnership deed, one of the partners, who was signatory to the deed, was a minor – No valid partnership
Udayalakshmi Hardware Stores Vs CIT (SC) 180 ITR(St)39
CIT Vs Oriental T. Maritime (AP) 227 ITR 244

Some partners held to be benamidars – Firm not genuine
S.P. Gramaphone Co. Vs CIT (SC) 158 ITR 313
CIT Vs Jayalakshmi Oil Farm (AP) 228 ITR 443

Duty of ITO to find whether firm was genuine – Failure to produce partners of firm on demand by ITO – firm held not genuine.
Frontier Construction Vs CIT (Gau) 221 ITR 878

One partner acting as consultant, not contributing capital, not taking interest in the business, not entitled to share in profits / losses, paid fixed commission and to be indemnified against claim for damage - No genuine firm
CIT Vs Ravi Constructions (AP) 169 ITR 662

The execution of a partnership deed is not by itself a talisman which can entitle a firm to be registered - There must be circumstances and facts to who that it had come into existence and that it had carried on business.
CIT Vs S.S.A.M. Shanmugha Nadar Financing Corpn. (Mad) 141 ITR 656

No business carried on – No partnership firm.
Sudarshan & Company Vs CIT (Mys) 89 ITR 85
CIT Vs Ferozepur Ice Manufacturers' Association (P&H) 84 ITR 607

Letting out building & collecting rent do not amount o carrying on of business, but are only incidental to ownership – No valid partnership – assessed as AOP.
CIT Vs Phabiomal & Sons (AP) 158 ITR 773
CIT Vs Veerabhadra Industries (AP) 240 ITR 5
Ramniklal Sunderlal Vs CIT (Bom) 36 ITR 464

Partnership formed with object of purchasing lottery tickets and sharing prize money – No business was carried on.
CIT Vs S. Mariappan (Mad) 238 ITR 826
State Abkari Act prohibiting licensee from selling or otherwise transferring his license – Licensee entering into partnership – Partnership not valid
CIT Vs Narayanan & Co.(Ker-FB) 223 ITR 209, 234 ITR 133
Biharilal Jaiswal etc. Vs CIT (SC) 217 ITR 746
Motilal Chunilal Vs CIT (SC) 234 ITR 472

Gold Control Act prohibits transfer of license – Dealing in Gold by firm on the basis of license obtained by partner – Partnership not valid.
CIT Vs Koonan's Jewellery (Ker) 226 ITR 588

Only salary actually paid or provided in accounts can be allowed as deduction and not the maximum limit worked out as per sec. 40(b)
Sri Balaji Agencies Vs ITO (ITAT, Chennai) 106 ITD 419