This appeal for year 1979-80 is by assessee. It arises out of order of AAC, who confirmed action of ITO in not allowing registration to assessee-firm. assessee is firm consisting of ten partners. It was formed under deed dt. 9th Feb., 1979. assessee had filed application for registration in Form No. 11. application was also filed in time. firm had brought to notice of ITO in course of assessment proceedings that each of partners had entered into sub-partnership and, therefore, share allocated to each partner was not entirely his income. ITO took view that in these circumstances each partner must be considered to be benamidar of his partner in sub-partnership to extent of share of other sub partner. assessee had not given intimation in Form No. 12 in accordance with r. 24A. ITO therefore, held, by invoking Expln. to s. 185(1) that firm is not genuine firm and therefore, not entitled to registration. assessee claimed before ITO that no question of benami is involved in case of sub-partnership, that there is vested in sub-partner overriding title in respect of share to which be is entitled in income of partner from firm and, therefore Expln. to s. 185(1) is not applicable. failure on part of partners of assessee firm to make commission to ITO as required in r. 24A, is not therefore, material or relevant. These submissions were rejected by ITO for reasons in his order passed under s. 185 (1) (b) of IT Act, 1961. In appeal before AAC assessee relied upon same contentions. It was also submitted alternatively that partners of assessee- firm did not believe that they were benamidars to any extent in respect of share in partnership and, therefore, did not see any need to send communication in Form No. 12A to ITO. However, if ITO considered that legal position here was that each partner is benamidar to some extent, then he should have allowed opportunity to partners of assessee firm to send communication in Form No. 12A because each partner did know that all other partners like him had entered into sub-partnership and there was no question of keeping that fact away from any person including ITO. AAC agreed with views of ITO regarding requirement of communication in Form No. 12A. He rejected alternative contention of assessee for being afforded opportunity to enable partners to file communication in Form No. 12A on ground that rules did not provide for extension of time specified in rules by ITO. Before us same contentions are raised It is further submitted that sub-partnership is well recognised in law and there is no question of treating sub-partnership as benami transaction. It is submitted that under law sub-partner has overriding title to extent of his sub-partner's share in share of main partner in main firm. Since this cannot be considered to be benami transaction, there is no requirement of complying with provisions of Expln. to s. 185 of Act and r. 24A. In alternative, it is pleaded that in view of circumstances and controversial nature of main question involved, viz,, whether sub-partnership can be considered to be benami transaction ITO should have afforded opportunity to partners of firm for sending communication in Form No. 12A. it is pointed out that even in Form No. 11 declaration is to be given in item (3) that no partner is benamidar of any other partner. assessee has filed application in Form No. 11 without making necessary modification of this particular item and, therefore, application itself cannot be considered to be in order, and under s. 185(2) of Act ITO is required to bring that to notice of assessee- firm and give opportunity to assessee-firm to rectify and make application proper and in order. On behalf of Department, reliance is placed on orders of ITO and AAC. It is submitted that in view of wording of Expln. to r. 185 (1) even sub-partnership would be benami transaction and, therefore, mandatory requirement of Explanation has to be carried out. question before us is whether arrangement between partners of assessee-firm and their sub-partners is benami transaction, so as to constitute partners in assessee-firm benamidars of sub-partners. Sub-partnership is recognised as legally valld. It has been held by Supreme Court in Muralidhar Himtsingka vs. CIT(1966) 62 ITR 323 (SC) that under agreement of sub-partnership there is diversion of portion of partner's share of income by overriding title. It has also been held in CIT vs. Sivakasi Match Exporting Co. (1964) 53 ITR 204 (SC), CIT vs. Hukumchand Mannalal & Co. ( 1970) 78 ITR 18 (SC) and CIT vs. Chandar Bhan Har Bhojanlol (1966) 60 ITR 188 (SC), that firm would be entitled to registration although partner may divide his share of profits with others, for example, sub-partners or members of any firm. relation between partner in firm and his sub-partner cannot be considered to be same as relation between benamidar and real owner. In case of benami holding real owner will have to set up his claim against benamidar, if benamidar repudiates ownership of real owner. sub-partnership arrangement is different. It has been observed by Supreme Court in CIT vs. Bagyalakishmi & Co. (1965) 55 ITR 660 at 664 (SC): "A contract of partnership has no concern with obligation of partners to others in respect of their shares of profits in partnership it only regulates rights and liabilities of partners. partner may be Karta of joint Hindu family; he may be trustee; he may enter into sub-partnership with others; he may under agreements express or implied, be representative of group of persons; he may be benamidar for another. In all such cases he occupies dual position. Qua partnership, he functions in his personal capacity, qua third parties, in his representative capacity. third parties, whom one of partners represents, cannot enforce their rights against other partners nor can other partners do so against said third parties. Their right is only to share in profits of their partner representative in accordance with law or in accordance with terms of agreement, as case may be." From this passage it is clear that sub-partnership is not same as benami holding. Expln. to s. 185 (1) cannot, therefore, be invoked in case of sub-partnership. lower authorities were therefore to be considered to have been in error in concluding that each of partners in assessee firm is benamidar for his sub-partner and therefore, Explanation in question applied. There is no other ground on which registration has been denied to assessee. We would, therefore, direct ITO to allow registration to assessee-firm. assessee-firm. In view of foregoing, we are not considering alternative contention raised by assessee that assessee should have been afforded on opportunity to give notice required under s. 24A. Appeal is allowed. *** ANANDA JOTHI FINANCE CORPORATION v. INCOME TAX OFFICER