9911796707
TMI Blog1983 (2) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... rm and was entitled to registration ? " The circumstances under which the said reference came to be made may briefly be stated. The HUF of which Sri K. T. S. Nagamanickam Chettiar is the karta was carrying on two businesses, viz., sale of petroleum products of the Indian Oil Corporation and rice business. The said family consisted, inter alia, of the karta, his wife and ten sons of whom seven were majors during the relevant period. On April 1, 1973, the business in the sale of petroleum products was converted into a partnership firm. This was done by the karta taking in four of his major sons, Viswanathan, Thirumalaiswamy, Venugopal and Prabhakaran as partners. A deed of partition was entered into among them on the same day. The karta con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat view, he held that the firm is entitled to registration. The Revenue took the matter in appeal to the Tribunal contending that so long as the HUF remained joint, it is not possible for the coparceners to carry on business along with the karta as partners, that since the entire share of K. T. S. Nagamanickam Chettiar was not held on his behalf but was held on behalf of the other four partners, he should be taken to be a benamidar for the other partners, that, consequently, Explanation to s. 185(1) of the I.T. Act will stand attracted and that, therefore, the assessee-firm cannot be treated as a validly constituted one. The Tribunal rejected the contentions advanced on behalf of the Revenue and held that it is open to the karta of a HUF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment to income-tax of the HUF, the question arose whether the mill could be held to belong to the joint family of Lachhman Das or to the partnership consisting of the said family on the one part and Daulat Ram on the other. The High Court held that Daulat Ram could not be considered as a stranger so long as he continued his connection in the undivided family in his capacity as a coparcener and, consequently, there was no valid partnership between Lachhman Das on the one hand and Daulat Ram on the other and the mill had to be, therefore, treated as an asset of the HUF. The matter ultimately went up before the Privy Council and the Privy Council reversed the decision of the High Court. The relevant observations of the Privy Council ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a contractual relationship can validly come into existence, the 'natural family relationship must be brought to an end'. This erroneous view appears to have coloured his and the subsequent decisions of the income-tax authorities. In this view, of the Hindu law, it is clear that if a stranger can enter into partnership, with reference to his own property, with a joint Hindu family through its karta, there is no sound reason in their Lordships' view to withhold such opportunity from a coparcener in respect of his separate and individual property. " Thus, the view taken by the Privy Council was that any individual coparcener without separating himself from the family can enter into contractual relationship with a karta of a HUF in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue that since the share income of the karta belongs to the HUF and since other partners are also entitled to the benefits thereof in their capacity as coparceners, the karta-partner should be treated as a benamidar for the other partners and, therefore, the Explanation to s. 185(1) stands attracted with the result, the firm should be treated as not validly constituted. We are unable to accept the above contention. We do not see how the karta can be treated as benamidar for the other four partners who are some of the coparceners of the HU F. The karta-partner himself has got his interest in the joint family, and therefore, he cannot in any sense be considered to be a benamidar of the other partners. In this view, we have to uphold the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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