A change in the constitution of a firm under Section 187(2)(b) of the Income-tax Act, 1961, occurs only when there is a change in the share ratio of the partners.

( 1 ) AT the instance of the Revenue, the Income-tax Appellate Tribunal, Delhi Bench "a", New delhi, has referred the following question for our opinion :

"whether, on the facts, and in the circumstances of the case. , the Tribunal was correct in holding that there could not be said to be any change in the constitution of the firm in this case and, as such, the Tribunal was correct in confirming the order of the Appellate Assistant commissioner in granting the assessee the benefit of registration for the assessment year 1970-71 and continuation of the same for the assessment year 1971-72?"

( 2 ) THE facts are that the partnership styled as M/s. Bansal Tel Bhandar, Bareilly, was constituted under a partnership deed dated December 20, 1968, by three partners, namely, Smt. Pushpa devi, Smt. Shanti Devi and Raja Ram, whose shares were described as 40%, 40% and 20%, respectively, in the said deed. The accounting year of the firm ended on Diwali day, 1969, i. e. , october 18, 1969. For the assessment year 1970-71, the firm made an application in Form No. 11 seeking registration on October 14, 1969, along with the instrument of partnership deed dated december 20, 1968. The Income-tax Officer, however, found that the three partners divided their shares in equal share ratio in the books of account and not as per the instrument dated December 20, 1968. He, therefore, took the view that there was a change in the constitution of the firm and hence refused to grant registration.

( 3 ) THE matter was carried in appeal before the Appellate Assistant Commissioner and then it was contended on behalf of the assessee that the supplementary partnership deed was executed on may 4, 1969, in which all the three partners agreed that their shares would be equal right from the inception. It was, therefore, pleaded that the shares had been divided equally in view of the partnership deed dated December 20, 1968, coupled with the supplementary deed dated May 4, 1969. He, therefore, set side the order of the Income-tax Officer and directed him to reconsider the matter after giving a proper opportunity to the assessee.

( 4 ) ON second round, the Income-tax Officer examined the stamp vendor from whom the stamp paper for the supplementary deed was purchased and he also recorded the statements of the lady partners and of the witnesses. He then found certain discrepancies in the statements of these persons. He was of the view that had the parties genuinely executed the supplementary deed dated May 4, 1969, they would not have stated their share ratio in the application Form No. 11 as 40 : 40 : 20, but they would have stated the correct share ratio as in the said Form No. 11. For these reasons, he again refused to grant registration to the assessee-firm.

( 5 ) THE dispute was then carried in appeal to the Appellate Assistant Commissioner who took the view that there was no change in the constitution of the firm. Similar view was taken on further appeal by the Appellate Tribunal.

( 6 ) WE have carefully gone through the orders of the Appellate Tribunal. Findings of fact have been recorded by the Tribunal that the supplementary deed dated May 4, 1969, was executed by all the partners wherein they agreed to share the profits equally from the beginning. This being so, the Tribunal was of the view that there was no change in the constitution of the firm, as the share ratio remained the same right from the beginning. In view of this finding of fact recorded by the Tribunal, as a matter of fact, no question of law arises for our consideration. Sub-section (2) of Section 187 of the Income-tax Act, 1961, is as under :

" (2) For the purposes of this section, there is a change in the constitution of the firm (a) if one or more of the partners cease to be partners or one or more new partners are admitted, in such circumstances that one or more of the persons who were partners of the firm before the change continue as partner or partners after the change ; or (b)