New Form Nos. 11, 11A and 12 incorporating provisions of Explanation inserted by Taxation Laws (Amendment) Act, 1970 not to be insisted upon for assessment years 1971-72 and 1972-73 but firms be allowed opportunity to file application in new forms

1. Section 185(1) has been amended by the Taxation Laws (Amend­ment) Act, 1970, by the insertion of an Explanation , under which a firm shall not be regarded as a genuine firm if any partner of the firm was, in relation to the whole or any part of his share in the income or property of the firm, at any time during the previous year, a benamidar of any other partner to whom the first-mentioned partner does not stand in the relationship of a spouse or a minor child. The amendment of section 185(1) is effective from April 1, 1971. Accordingly, registration may be refused to a partnership firm by virtue of the Explanation only for the assessment year 1971-72 and subsequent years. Similarly, a firm, which has been enjoying the benefit of registration for assessment year 1970-71, is liable to lose the benefit if the Explanation applies to it for the previous year relevant to the assessment year 1971-72 or any subsequent year.

In consequence of this provision, the prescribed application Form Nos. 11, 11A and 12 have been suitably amended to provide for a declaration by the firm to the effect that none of the partners of the firm was at the relevant time a benamidar of another partner to whom he is not related as a spouse or minor child. This has been done through Notification dated 31-5-1971, regard­ing the Income-tax (Fourth Amendment) Rules, 1971, which came into force on April 1, 1971.

2. It is likely that in respect of the assessment for the year 1971-72 firms might have filed application for registration/continuation of registration in old Form Nos. 11, 11A and 12 without taking into consideration the amendment made in 1971 to the said forms.

It has been decided that in the cases of the type discussed above, the Income-tax Officer should allow the firm concerned an opportunity to file the application in the amended Form Nos. 11, 11A and 12, as the case may be, for the assessment year 1971-72 within a period of one month of receipt of intimation by the firm from the Income-tax Officer regarding the requirement of filing the application in the amended form. If the firm furnishes a fresh application in the said amended form, the Income-tax Offi­cer should dispose of such an application on merits.

Circular: No. 70 [F. No. 210/33/71-IT(A-II)], dated 11-12-1971.

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