TMI Blog1976 (11) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... 254-257/72-73 has taken a contrary view. It has, therefore, become necessary to resolve the above conflict. 2. The factual background of the case is in a very brief compass. M/s. Ramchandra Narain, Rampura, Kota was a Hindu Undivided Family assessed as such for assessment years 1950-51 to 1953-54. On18th Oct., 1952, there was a partial partition of the business of the family. The three members of the Hindu Undivided Family were Narain and his two sons, Neopram Kanhaiyalal. On the partition, the net capital in the business was divided amongst the three members and with this as their investment, they constituted a partnership firm with equal shares under an instrument dated21st Oct., 1952which took over and continued the business as a go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in law against the Karta of Hindu Undivided Family entering into a partnership with a member of the family, though undivided, where such undivided member either brings into the firm his own individual property or where he is taken in purely as a working partner, though the assessee sought to make good this contention by relying on a decision of the Mysore High Court in 74 ITR 529 and a decision of the Supreme Court in 78 ITR 18. 4. On appeal, the Appellate Asstt. Commissioner relying on the order of the Delhi Bench referred to earlier, expressed his conclusions thus: "In my view no doubt a member of HUF can become partner of the firm in which Karta is also partner but for this he has to fulfil certain conditions as is clear form the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank confirming that most of the banking transactions like withdrawn of money, pledge and delivery of goods is done under the signatures of Shri Balmukund. A certificate of Registrar of firms, Rajasthan, Jaipur, has also been produced. But these are all formalities and unless it is established that he was really working with the firm, it is not possible to accept the proposition that he was a working partner. The ITO appears to have not examined these three points namely (i) he should not acquire a share in the firm to detrement of the interest of the HUF (ii) either he should have contributed his own capital or he should have contributed skill, labour etc., and (iii) the firm should not be bogus before refusing registration. I therefore, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m not by one but by two of its members vide Commissioner of Income-tax vs. Hukam Chand(3). The rule is also not infringed when an individual undivided member brings in his own individual property and becomes a partner by virtue thereof as is seen from the decisions of the Allahabad High Court in Commissioner of Income Tax vs. Motilal Bankers (4) and of the Gujarat High Court in 78 ITR 96 96 ITR 442. The Appellate Asstt. Commissioner rightly thought that in this case, the facts needed a further probe in order to find out the manner in which Balmukund was taken in as a partner and the manner in which the interest of Narain devolved on his death. While on the one hand it appears that the Hindu Undivided family having had previously only 33 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner has answered this question in favour of the assessee. We are prima facie included to follow the view of the Mysore High Court. The decision of the Delhi Bench referred to by the Appellate Asstt. Commissioner (to which one of us was a party) has taken this view. If, in principle, there can be no objection to a karta and an undivided member being partners so long as it is not qua Hindu undivided family property, it appears to us that there could be no objection to an undivided member being taken in as a working partner. In such a case also, there is, in the words of the Allahabad High Court on CIT vs. Motilal Bankers (4) "no confusion between his capacity as a coparcener and his capacity as a partner with respect to Hindu undivided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the question whether the firm is validly constituted will have to be considered. We therefore, think that it is some-what premature to decide an issue on the basis of a hypothetical assumption of facts. Moreover, it is possible that by the time the Income-tax Officer completes the investigation the judicial conflict may have been resolved by a decision of the Supreme Court or otherwise. Hence though we indicated our prima facie view, we are of opinion that this aspect should be gone into by the Income-tax Officer afresh after the basic fact is ascertained and in the light of the authorities that may then be available. We, therefore, refrain from giving a conclusive finding at this stage that the assessee would be entitled to registration ..... X X X X Extracts X X X X X X X X Extracts X X X X
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