TMI Blog2017 (2) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... s which permeates from earlier years, is consistently the same, it would not be appropriate to disturb the conclusions reached based on such facts. No doubt, rule of res judicata may not be applicable to the income-tax proceedings, but the rule of consistency demands that a position consistently taken shall not be disturbed unless there were significant change in facts. Insofar as reliance placed on Section 40(b) of the Act by the A.O. is concerned, there is nothing in that section to conclude that a partnership could not be formed by a karta of an HUF in his individual capacity with other persons. The same, in our opinion, would also apply where an individual who joins partnership in a representative capacity. It can always be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri R. Kumaravelu HUF 2. The Marigold Trust 3. The Chrysanthemum Trust In M/s Aqua Sub Engineering:- S. No. Name of the Partners 1. Shri R. Kumaravelu HUF 2. The Marigold Trust 3. The Chrysanthemum Trust The Assessing Officer was of the opinion that in these partnership firms, there was not even a single partner who was a natural person. As per the A.O., all the partners were legal or artificial entities and the partnership firms could not exist with artificial pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciative of the contention taken by the assessees. According to him, in the case of Ram Laxman Sugar Mills v. CIT (1967) 66 ITR 613, the Hon'ble Supreme Court had held that the karta of a HUF could enter into an agreement of partnership with another undivided family member or stranger. Further, according to him, Hon'ble Supreme Court in the case of Rashik Lal Co. (supra) clearly held that though a HUF could never be a partner of a partnership firm, if a person nominated by a HUF joins a partnership, the partnership would be between the nominated person and the other partners of the firm. Therefore, according to him, a karta of HUF could be a partner and the relationship of the karta as a partner vis- -vis the firm and other partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make the partnership a non-genuine one. In any case, according to him, the partnership firms had acquired the status of registered firms as early as assessment year 1991-92 under Section 185(1)(a) of the Act and therefore, the Assessing Officer could not disturb a consistent position taken by the Revenue for more than two decades. 7. We have perused the orders and heard the rival contentions carefully. The question before us is whether the partnership was one formed between the HUF and two trustees or between three individuals. One more question also arises whether a valid partnership could be formed between three persons in representative capacity. Relevant clauses in partnership deed in the case of Aqua sub Engineering read as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dred and Ninety. WHEREAS, Mr. R. Kumaravelu the party hereto of the First Part represents the Hindu Undivided Family consisting of himself, his wife and minor daughter, of which Hindu Undivided Family he is at present the Kartha. 9. In our opinion, the above clause would not ipso facto convert partnership firm as one entered between two Trusts and an HUF. This is because of the reason that in the first part of partnership where the description of parties are given, it is never stated that the parties were representing any Trust or HUF. Even if we take that Shri R. Kumaravelu was representing an HUF, by virtue of judgment of Apex Court in the case of Rashik Lal Co. (supra), he could also be considered as a partner in his indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in dispute that the assessees were granted the status of registered firm by virtue of provisions of Section 185(1) of the Act since assessment year 1991- 92. The position continued for a period of twenty years and it was after such twenty years, the Assessing Officer attempted to disturb this. When a set of facts which permeates from earlier years, is consistently the same, it would not be appropriate to disturb the conclusions reached based on such facts. No doubt, rule of res judicata may not be applicable to the income-tax proceedings, but the rule of consistency demands that a position consistently taken shall not be disturbed unless there were significant change in facts. Insofar as reliance placed on Section 40(b) of the Act by the A. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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