9911796707
TMI Blog1984 (10) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... and the minor, Shri Rajendra Prasad, became the new partners of the firm. As per the partnership deed, the share of profits/losses to be shared by the partners was : Share of profit/loss 1. Shri Bhagwandas (HUF) 35 per cent 55 per cent 2. Shri Kailashchandra 25 per cent 25 per cent 3. Smt. Saraswati Devi 20 per cent 20 per cent 4. Shri Rajendra Prasad (minor) 20 per cent Nil Mr. Ranka further submitted that the firm in the immediately preceding year was granted registration. 3. Mr. Ranka submitted that the ITO did not grant the registration on couple of grounds. The first being that no partnership could be constituted between the HUF and the coparceners of the HUF. The second being, Kailashchandra could not be examined in spi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose, he drew our attention to page 25, where the capital accounts of the partners have been filed. The quantum of capital contribution is not a very relevant one ; though Smt. Saraswati Devi has contributed a sum of Rs. 6,000 only, the Income-tax Department has been satisfied that she had, in fact, contributed this capital. The grievance of the department is that the fact that she was a dormant partner, was not mentioned in the partnership deed. For the proposition that any one partner can act on behalf of all the partners, he relied on several judgments including the case of Subhash Medical Stores v. CIT [1984] 147 ITR 486 of the Rajasthan High Court. He also relied on this judgment for the paltry sum of contribution by some partners. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d only Rs. 6,000, At the end of the year, the balance in the account of Shri Bhagwandas (HUF) was only Rs. 6,215, which only indicates that capital was not at all required for the firm. As per the partnership deed, Shri Bhagwandas shall be responsible for looking after the day-to-day business of the firm. According to Mr. Ruhela, since this has been provided, and in view of the fact that Shri Kailashchandra remains in Delhi and Smt. Saraswati Devi is a sleeping partner, it could only be concluded that there is no genuine partnership amongst the partners. Shri Bhagwandas is the sole proprietor of the concern. 8. We have heard the parties. The basis of refusing registration by the ITO is : (a) that the HUF and the coparceners cannot form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht have been at the early stages of its development, their Lordships think that it is now firmly established that an individual coparcener, while remaining joint, can possess, enjoy and utilise, in any way he likes, property which was his individual property, not acquired with the aid of or with any detriment to the joint family property. It follows from this that to be able to utilise this property at his will, he must be accorded the freedom to enter into contractual relations with others, including his family, so long as it is represented in such transactions by a definite personality like its manager. In such a case he retains his share and interests in the property of the family, while he simultaneously enjoys the benefit of his separa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such by the department, but in the subsequent year it could be doubted that he was a partner at all or not. The capital contribution of this partner, is not in doubt. In view of the fact that he was a partner in 1978-79 and continues to be so in the reconstituted firm, it could only be concluded that he was a partner in the firm for the assessment year 1979-80 as well. 11. In the case of Smt. Saraswati Devi, the department is harping on the fact that she had stated in the affidavit that she was a dormant partner. The Madhya Pradesh High Court decision in United Patel Construction Co.'s case is to the effect that a partnership may comprise some member known as a dormant or a sleeping partner, who is not generally interested in the condu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely : (i) that there should be an agreement to share profits and losses of the business of the firm ; and (ii) that the business must be carried on by all the partners or any of them acting for all. Clause 5 read with other clauses showed that the first condition, namely, all persons agreeing to share profits or losses, was satisfied. The second condition was also satisfied : even though vast powers of management and control had been given to K, the business was being carried on by him on behalf of all the partners. Both the ingredients of partnership were satisfied and the firm could be granted registration under section 26A. Held also, that the provision in clause 9 of the deed was only an inter se arrangement entered into by the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
