9911796707
TMI Blog1976 (6) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... son respectively, of Shri Jai Narain Modi. All these three persons constituted a Hindu Undivided Family, Karta being Shri Jai Narain Modi. Smt. Dropadi Devi and Shri Jai Narain Modi claimed to have formed a partnership under the partnership deed dt. 26th July, 1969 in their individual capacity and they accordingly applied under the prescribed Form No. 11, duly signed by them along with the instrument of partnership deed, for registration. In view of cl. 5 of the partnership deed dt.26th July, 1969, the two partners were to subscribe the capital of their own and in case they are not in a position to subscribe the full capital and if additional finance was required to run the partnership business, they were entitled to raise the finance by wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners acted contrary to the terms of the partnership deed. That being so, he refused the assessee the registration applied for. Also, the ITO held that the business carried on by the two partners is the business of the HUF as HUF funds were utilised to carry on this business. The ITO did not believe the case of the assessee that the funds were borrowed from HUF inasmuch as, in his opinion, no interest was paid to HUF by the assessee. On this ground also, the registration was refused. 3. The dispute was carried to the AAC in appeal by the assessee who reversed the findings of the ITO. He held that all the necessary ingredients of the partnership defined in s.4 of the Partnership Act are present in assessee's case. It has also been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fuse registration to the assessee-firm on the ground that the assessee acted contrary to the terms of the partnership deed and the business carried on by them actually belonged to the HUF as the fund's belonging to HUF were utilised by the assessee-firm in carrying on the impugned business. In order to decide this question, we have to look at first to the provisions of the Partnership Act. s.4 of the Partnership Act defines the term "partnership". It says that "Partnership" is the relation between the persons, who have agreed to share the profits of a business carried on by all or any of them acting for all. Thus the legal requirements under s. 4 of the partnership Act, to constitute a partnership, are that:-- (i) There must be an agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the ITO to consider at the time of granting registration as to where from the funds utilised in the business were brought. The registration cannot be refused simply on the ground that the funds utilised in the business brought from the HUF It is clearly held by the Supreme Court in CIT. Madhya Pradesh, Nagpur and Bhandara vs. Sir Hukumchand Mannalal & Co (2), that members of a Hindu Undivided family are under no disability in the matter of entering into a contract inter Schedule or with a stranger. A partnership will not be invalid merely because two or more of the partners are members of a Hindu Undivided family and represent the interest of the family. Thus, the members of the HUF are at liberty to form the partnership. The registrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment and that has no relevance to the matter of registration. At the time of assessment, the ITO has considered the question as to in whose name the income accruing from such business should be assessed in the name of the partners who are said to be benamidars or in the name of the HUF whose funds have been utilised to carry on the business. There is clear law that if the business is carried on by the members of the HUF with the help of the funds of the HUF and to the detriment to HUF, then the income of the partnership would be assessed in the hands of the HUF and not in the hands of the members of the HUF who formed the partnership. 6. Partnership is a matter of agreement between the parties and the parties including the members of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the partnership deed shows that the partners have entered into partnership in their individual capacity and there is nothing to indicate that they have done so, in any other capacity, then the purports of the deed be given effect. On perusal of cl. 2 of the deed, it appears that both the partners joined the firm in their individual and personal capacity. No partner joined the firm in representative capacity and none of the partners represented the family, association of persons or otherwise there is nothing to show on record that the partners entered into an agreement of partnership in any other capacity or as a benamidar for the HUF simply because the capital belonging to HUF was utilised by the partners to carry on the business of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
