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TMI Blog2018 (3) TMI 1631X X X X Extracts X X X X X X X X Extracts X X X X ..... res and sells pumps. While making the assessments for assessment years 2009-10, 2010-11, 2013-14 & 2014-15, the AO noticed that Shri R. Kumaravelu HUF, The Marigold Trust and the Chrysanthemum Trust were the partners of the firm. The AO was of the opinion that in this firm there was not even a single partner who was a natural person. As per the AO, all the partners were legal or artificial entities and a the partnership firm could not exist with the artificial persons alone. When this was put to the assessee, it replied that an individual could be a partner representing HUF, where he was a member and relied on the judgement of the Apex Court in the case of Rashik Lal & Co vs CIT (1998) 229 ITR 458. The AO was not impressed. Accordingly to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm has to be treated as Association of Persons and thus the claim of expenses on interest and remuneration to partners has to be disallowed, under the provisions of section 40(b). 5. For these and other grounds that may be adduced at the time of hearing. the order or the CIT(A) may be cancelled and that of the Assessing Officer restored." 4. We heard the rival submissions. The relevant portion of the CIT(A) order is extracted as under: "11. Against the said order of the CIT(A) the Department filed appeal before the Hon'ble ITAT. The Hon'ble ITAT vide their order in ITA No.1959/Mds/2016 and C.O. No.112/Mds/2016 passed a combined order in both the cases [Appellants AQUAPUMP INDUSTRIES and AQUASUB ENGINEERING] dated 03.02.2017, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capacity and not in their individual capacity, considering the following clause appearing in page 2 of the partnership deed. The said clause is reproduced hereunder: 'WHEREAS the parties hereto of the Second and Third Parts are partners in a representative capacities .respectively, representing "THE CHRYSANTHEMUM TRUST'; and "THE MARIGOLD TRUST'; being trusts evidenced by two indentures of Trust dated the Twenty fifth day of February, One Thousand Nine Hundred 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 wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Family joins a partnership, he can do so only as an individual. His rights and obligations vis-a-vis other partners are determined by the Partnership Act and not by Hindu Law". 10. What their Lordship held is that even if a person nominated by HUF joint a partnership, the partnership could be deemed as one between such nominated person and other partners of the firm. The Apex Court did not hold that such partnership would only be an Association of Persons. In any case, it is not 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 Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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