Madras High Court
Commissioner Of Income-Tax vs A.M.A.A.T. Nataraja Nadar on 23 April, 1998
Equivalent citations: [2000]243ITR844(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu
JUDGMENT R. Jayasimha Babu, J.
1. The question referred to us at the instance of the Revenue arising out of the assessment of its income for the assessment year 1982-83 is as under :
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that there was no infirmity in S.S.N. Subbu and S.S.N. Dhanasekar signing the instrument of partnership both as individuals and as representing their respective Hindu undivided families and that the assessee-firm was entitled to the registration under the Income-tax Act for the assessment year 1982-83 ?"
2. The Income-tax Officer had declined to grant registration to the respondent assessee-firm on the ground that two of the eight partners had dual capacity being partners in their own right and also as representing" their respective Hindu undivided families. The firm had been constituted admittedly under a partnership deed dated April 1, 1981. The genuineness of the partnership deed was not doubted. There was also no doubt of the fact that even if the dual capacity of these two partners were to be ignored, there were sufficient number of persons left to validly constitute a firm.
3. In appeal, the Commissioner upheld the view of the Income-tax Officer placing" reliance on the decision of the Calcutta High Court in the case of HOOSEN Kasam Dada v. CIT [1937] 5 ITR 182 and that of the Patna High Court in the case of Rai Bahadur Lokenath Prasad Dhandhania v. CIT [1940] 8 ITR 369.
4. The Tribunal to which further appeal was preferred, held and in our view, rightly, that the present case is not covered by the ratio of the two decisions on which the Commissioner had placed reliance, and allowed the assessces' appeal. The Tribunal pointed out that unlike in the two cases relied on by the Commissioner, in this case there were four other partners besides the two persons who had acted in dual capacity, and the firm being legally constituted, there was no impediment for the same being registered.
5. The Supreme Court in the case of CIT v. Kandath Motors [1997] 224 ITR 663 considered the decisions of the Calcutta High Court and Patna High Court on which the Commissioner had placed reliance, and held that the decision as also the observations made by the Calcutta High Court must be confined to the facts of that case. In the Calcutta case it was held that a wakf represented by the mutawalli could not enter into a partnership. In the case of Rai Bahadur Lokenath Prasad Dhandhania [1940] 8 ITR 369 (Patna). the karta of a Hindu undivided family sought registration of a firm in which the only other partner was himself acting as an individual, the Patna High Court held that there should be plurality of persons before a firm could be said to have come into existence.
6. The apex court in the case of Kandath Motors [1997] 224 ITR 663, has held that where the legal representative of the deceased partners is also one of the surviving partners, he can agree to join the new partnership also as a nominee of the legal heirs of the deceased partner.
7. In the case of CIT v. Bagyalahshmi and Co. [1965] 55 ITR 660, the apex court held that a contract of partnership has no concern with the obligation of the partners to others in respect of their shares in the partnership.
8. In this case, the partnership deed shows that there were six other partners and even if the two partners who had also acted on behalf of their Hindu undivided families had not joined, there, the firm was a registrable firm and the fact that these two partners have joined the partnership also as representing their Hindu undivided families does not make their firm otherwise registrable into one which is not registrable.
9. The Tribunal's view is correct and we uphold the same.
10. The question referred is therefore answered in the affirmative, in favour of the assessee and against the Revenue. Mr. Ramakrishnan undertakes to file vakalat for the assessee and he is permitted to do so.