( 1 ) ON being moved by the assessee under Section 256 (1) of the Income-tax Act, 1961 (in short the Act), the Income-tax Appellate Tribunal Delhi Bench-C (in short, the Tribunal) has referred the following question for opinion of this court.

1. Whether, on the facts, and in the circumstances of the case, the Tribunal was correct in holding that on a true interpretation of clause 8 of the partnership deed dated 19. 7. 1971 and clause 9 of the partnership deed dated 26. 5. 1972 there was no partnership in existence and what was evident was only an employer-employee relationship in the garb of partnership ? Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the action of the Revenue in refusing registration for the assessment years 1973-74 and 1974-75 ?

( 2 ) FACTUAL position as indicated in the statement of case is essentially as follows:- One Brij Lal was carrying on business Ln the name and style of M/s K. B and Co on proprietorship basis upto 30. 6. 1971. With effect from 1. 7. 71, a partnership was con- stituted on the basis of a deed of partnership, which was drawn up on 19. 7. 1971. Shares in profit and loss were as indicated below: -Clause 3 of the deed of partnership provided that it was not necessary for any of the partners or for the minors to invest any amount towards the capital of the firm. Clause 6 provided that the bank account of the firm shall be operated by Brij Lal alone and by others only on the authority of Brij Lal. Clause 7 stated that the goodwill of the partnership was to be the sole property of Brij Lal and that the other partners had no fight in the same. Clause 8 and 9 which have substantial effect on the dispute at hand read as follows:

"8. The first party may, at any time or from time to time, require any of the other partners to quit the firm on one months notice. The party/parties to whom such notice has been given shall and shall be deemed to have quit the partnership and shall have no concern with the firm after expiry of the notice period except receiving any amount lying at his credit. Such party shall be liable to pay any debit balance in his account. ?"

"9. The first party may, at any time or from time to time , require the other partner to quit the firm on one month s notice The partner to whom such notice had been given shall and shall be deemed to have quit the partnership and shall have no concern with the firm after expirty of the notice period except that of receiving any amount lying at his credit. Such party shall be liable to pay any debit balance in his account. "on 3. 10. 1971 Asha Rani died. With effect from 4. 10. 1971 there was consequential change in the constitution of the partnership. A deed of partnership to record this change was drawn up on 26. 5. 1972. As per the said deed, Brij Lal and Surinder Kumar became entitled to l/5th share each in the profits of the firm and were to share the losses equally. Three minor sons became entitled to l/5th share each in the profits. Other terms of the deed remained the same as regards operation of bank account and good will. No capital was required to be contributed by any of the partners under this deed also. The firm closed its account for the first time on 30. 6. 1972 and applied for registration on Form-11 and 11a for the assessment year 1973-74. Income-tax officer refused registration by an order under Section 185. He noted that only Brij Lal had invested capital. The goodwill belonged to him exclusively and he could ask any other partner to quit. Additionally, he could decide whether any amount was required as loan and was authorised to execute necessary documents for that purpose. No intimation was sent to the bank or the Registrar of Firms regarding constitution of the firm or the change therein. Profits of the firm had not been distributed amongst the alleged partners or credited to their capital accounts. In these circumstances, it was held that the business actually b