1952 (8) TMI 32 - HC - Income Tax

Summary

Issues Involved:
1. Whether the inclusion of Ghanshyam Das and Sunder Lal as a coparcenary unit in the partnership deed rendered the partnership inoperative and illegal under Section 4 of the Indian Partnership Act.
2. Whether the application under Section 26A of the Income Tax Act, signed only by Ghanshyam Das, was a proper and valid application for registration of the partnership.

Issue-wise Detailed Analysis:

1. Inclusion of Coparcenary Unit in Partnership:
The primary issue was whether Ghanshyam Das and Sunder Lal, constituting a Hindu undivided family (HUF), could be partners in the partnership firm without specifying their shares inter se. The Tribunal decided against the assessee, stating that a HUF as such could not be a partner in a partnership. The High Court analyzed the decision in Lachman Das v. Commissioner of Income Tax, Punjab, which clarified that while a member of a HUF could enter into a partnership in his individual capacity, the question of a HUF itself being a partner was left undecided. The Court emphasized that a partnership is a contractual relationship and only those who enter into the contract can be deemed partners. The Court concluded that the HUF of Ghanshyam Das Sunder Lal could not be partners in the partnership. Ghanshyam Das and Sunder Lal could be partners, but their shares needed to be specified.

2. Validity of the Application under Section 26A:
The second issue concerned the validity of the application for registration under Section 26A of the Income Tax Act, which was purportedly signed only by Ghanshyam Das. Initially, the Tribunal assumed the application was signed solely by Ghanshyam Das, leading to the conclusion that it was defective. However, the assessee later discovered that both Ghanshyam Das and Sunder Lal had signed the application. The High Court noted that the Tribunal should not have held the application as signed only by Ghanshyam Das when it was evident from the application itself that both had signed. Consequently, the second question did not arise as the application was indeed signed by both parties.

Conclusion:
The High Court concluded that the HUF of Ghanshyam Das Sunder Lal could not be partners in the partnership as a coparcenary unit. Ghanshyam Das and Sunder Lal could be partners, but their shares needed to be specified. The Tribunal should have acknowledged that the application under Section 26A was signed by both Ghanshyam Das and Sunder Lal. The assessee was ordered to pay costs to the Department, assessed at Rs. 300.