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TMI Blog1984 (2) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... references for two different assessment years 1966-67 and 1967-68 ; but since common questions arose in two different assessment years in respect of two reference applications, the Income-tax Appellate Tribunal sent only one statement of case and, therefore, it was registered as only one reference. Poonam Chand who with his brother, Kalu Ram, constituted a HUF separated from him some time in the year 1936-37 and, thereafter, he started his own business at Kishangarh and was assessed as an individual till 1963-64. On January 27, 1963, Poonam Chand adopted one Paras Mal as his son and, therefore, returns for the assessment years 1964-65 and 1965-66 were filed in the status of HUF. On December 8, 1964, Poonam Chand made a gift of Rs. 11,001 to his son Paras Mal in the capacity as karta of HUF and an entry to this effect has been made in the books of account of the HUF. On December 9, 1964, a partnership deed was executed between Poonam Chand and Paras Mal whereunder the business of the HUF known as M/s. Gulraj Poonam Chand was to be treated as a partnership concern and the shares of the partners were as under : 1. Poonam Chand 60% share 2. Paras Mal 40% share In the preamble o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... September 3, 1968, and did not agree with the contention of the assessee that the judgment of the Gujarat High Court was distinguishable and that in view of the Privy Council's decision in Lachhman Das v. CIT [1948] 16 ITR 35 (PC), registration should have been granted to the assessee-firm and this judgment of the Privy Council was not considered by the Gujarat High Court. He further found that in view of the latter decision of the Supreme Court in Firm Bhagat Ram Mohanlal v. CEPT [1956] 29 ITR 521, the decision in Lachhman Das v. CIT does not hold water. The assessee then preferred a second appeal before the Income-tax Appellate Tribunal, which was also dismissed by order dated August 25, 1971, and the Tribunal also found that since Paras Mal bad no separate property on December 9., 1964, he could not enter into a partnership and the book entry gifting Rs. 11,001 was of no avail as the cash balance on December 8, 1964, available with the firm was only Rs. 3,356. Therefore, relying on the decisions of the Gujarat High Court in Pitamberdas Bhikhabhai Co. v. CIT [1964] 53 ITR 341, and of the Bombay High Court in Shah Prabhudas Gulabchand v. CIT [1970] 77 ITR 870, it came to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC). He further submitted that a karta of a HUF can enter into a partnership with another member of a HUF and a coparcener has freedom of contract like a stranger in respect of his individual property and can enter into a partnership with the karta by contributing his separate property. He can enter into a contract in respect of skill and labour as well and since in the partnership deed it has been mentioned that Poonam Chand cannot continue to control and manage the business due to age with due promptness and efficiency it was necessary to induct Paras Mal as a partner into the business. The partnership is perfectly valid and is entitled to registration and, in this connection, he has placed reliance on a decision of the M.P. High Court in Ramchand Nawalrai v. CIT [1981] 130 ITR 826, which has followed the decision of the Mysore High Court in 1. P. Munavalli v. CIT [1969] 74 ITR 529 and has distinguished the case of Shah Prabhudas Gulabchand v. CIT [1970] 77 ITR 870 (Bom). He has also placed reliance on CIT v. Gaekwade Vasappa and Sons [1983] 143 ITR 1, a decision of the Andhra Pradesh High Court. Munavalli's case [1969] 741 TR529 (Mys), was also applied in Ramchand Nawalrai v. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT [1964] 53 ITR 341 (Guj), as also of the Bombay High Court in Shah Prabhudas Gulabchand v. CIT [1970] 77 ITR 870 (Bom), have been distinguished and not followed by the Andhra Pradesh High Court. Even as early as in Lachhman Das v. CIT [1948] 16 ITR 35 (PC), it has been held that there can be a valid partnership between a karta of a HUF representing the family on the one hand and a member of that family in his individual capacity on the other. The view of the Privy Council still holds water and has not in any way been changed by the Supreme Court in Firm Bhagat Ram Mohanlal v. CEPT [1956] 29 ITR 521 (SC). This case is clearly distinguishable and does not in any way take a different or contrary view from what the Privy Council had taken in Lachhman Das v. CIT [1948] 16 ITR 35 (PC). In the present case also, in the deed of partnership entered on December 9, 1964, between Poonam Chand and Paras Mal, in the preamble itself, it is stated that due to old age it will not be possible for Poonam Chand to continue to control and manage the business with due promptness and efficiency and, therefore, it had become necessary to take Paras Mal, his adopted son, as a partner, which shows th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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