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TMI Blog2018 (9) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is not acceptable on the facts and circumstances or the case. 2.The Learned CIT(A) has erred in law, in deleting the disallowance on claim made uls 40(b). 3.The Learned CIT(A) has erred in not considering the fact that the firm comprises or three partners, namely R.Kumaravelu (HUF). The Marigold Trust and The Chi") santhernum Trust, wherein not a single partner is a natural person. As per the Partnership Act, a partnership firm cannot be formed between all artificial persons. 4.In the case or Rashik Lal& Co Vs CIT(1998) 96 Taxrnann 16 (SC). the Supreme Court has categorically held that a HUF cannot be a partner in a firm. It was further held that such individual, though being a karta of HUF can only be a partner ill his individua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.111/2016, dated 03.02.2017 are reproduced hereunder:- '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:- "THIS DEED OF PARTNERSHIP entered this Twenty Fourth Day of May, One Thousand Nine Hundred and Ninety among: (1) Mr. R. KUMARAVELU, Son of Late Mr. R. Ramaswamy, aged about 37 years, residing at 703, Avanashi Road, Coimbatore, hereinafter called "the Party of the First ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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. Kumaraveluwas 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 individual capacity. Para 13 of the judgment of Apex Court is reproduced hereunder:- "A Hindu undivided family cannot be in a better position than a firm in the scheme of the Partnership Act. The reasons that led this court to hold that a firm cannot join a partnership with another "individual" will apply wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts 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 consistencydemands that a position consistently taken shall not be disturbed unless there were significant changein 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 considered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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