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TMI Blog1980 (9) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of HUF separately, and cannot be clubbed together? " The facts leading to this reference are that the assessment years under consideration are assessment years 1969-70 and 1970-71, the relevant previous years being Samvat years 2024 and 2025, respectively. The assessee before us is a firm and the firm was treated as a registered firm by the ITO for the purpose of assessment for assessment year 1968-69, the corresponding previous year being Samvat year 2023. In that registered firm the partners were Budhalal Amulakhdas-37 1/2 per cent. share, Ugarchand Amulakhdas-25 per cent. share, Vinodchandra Budhalal-25 per cent. share and Navinchandra Sakarchand-12 1/2 per cent. share. Navinchandra, according to the arrangement reached amongst the partners inter se, was to have retired from the firm from Kartik Sud 1 of Samvat Year 2023. He, however did not retire as per the agreement reached amongst the partners and hence a suit was filed, being Suit No. 1902, in the appropriate court for declaring that Navinchandra had retired from the firm. The firm thereafter was reconstituted with effect from November 3, 1967, that is, from the commencement of Samvat year 2024. In the reconstituted f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not correct. It held that the correct status of the assessee was that of a registered firm and as regards the shares of the profits falling to the share of Budhalal Amulakhdas, the Tribunal held that Budhalal Amulakhdas should be assessed separately in his capacity as individual so far as profits from the partnership firm were concerned and he should be assessed separately in his capacity as karat of the HUF and the share of profits in his individual capacity should be assessed in the hands of Budhalal Amulakhdas only up to the extent of 25 per cent. for one year and 31 per cent. for the other year and the share of profits to the extent of 25 per cent. in one year and 31 per cent. in the other year should be assessed in the hands of the HUF. Thereafter, at the instance of the revenue, the three questions hereinabove set out have been referred to us for our opinion. On the facts which have been hereinabove set out, it is clear that the sole question on which the ITO rejected the application for registration for the two years under reference was that Budhalal Amulakhdas could not be a partner in a dual capacity. It is true that in Hoosen Kasam Dada v. CIT [1937] 5 ITR 182, Cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment was not completed till some time in 1947. In the meantime, Nemchand died in 1943. He left a will and under the will he left the residue of his estate to his grandson, Bhupendra, and he appointed his son, Jagatchandra, as his executor. Dholidas also died in July, 1945, and on the 10th of October a new deed of partnership was executed between the partners with the following shares 1. Jagatchandra Nemchand ... 7 annas 2. Babubhai Dholidas ... 1 anna 3. Chinubhai Dholidas ... 1 anna 4. Bhupendra Jagatchandra ... 7 annas This partnership deed was sought to be registered under s. 26A but the department refused to register it holding that the partnership deed was not validly executed by the partners inasmuch as Jagatchandra had signed the agreement in two capacities, one as representing the joint Hindu family and the other as the executor of the will of Nemchand. On these facts the Division Bench consisting of Chagla C.J. and Tendolkar J. held that there was nothing in law which precluded a person from signing a partnership deed in two different capacities and the department was in error in refusing to register it on that ground. If registration had been refused on the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided that, the death of a partner would not operate to dissolve the firm. This was permissible and quite consistent with the provisions of the partnership deed as well as s. 37 of the Indian Partnership Act. In accordance with the devolution of interest, the three heirs had constituted one of the other partners as their representative to carry on the business of partnership by their power-of-attorney. That partner had joined the reconstituted partnership in a dual capacity as partner himself, and as representing the three heirs of the deceased partner. It was held that this could not, in the circumstances, be regarded as an invalidating factor affecting the genuineness or validity of the partnership. The reconstituted firm was genuine and was entitled to registration, and the Kerala High Court followed the decision in Raghavji Anandji and Co.'s case [1975] 100 ITR 246 (Bom). The Kerala High Court held that this decision was strictly in point and even if the question of the validity of the partnership deed by reason of Krishnadas having signed twice in the document were to arise for consideration the High Court would have been prepared to hold that that circumstance by itself, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese circumstances it is obvious that the Tribunal was right in coming to the conclusion that it was open to Budhalal Amulakhdas to be a partner with others in the firm of M/s. Budhalal Amulakhdas in a dual capacity one as representing himself and the other as representing the undivided family of which he was the karta. As regards the question of complying with the requisite conditions the Tribunal has found as a fact that the requisite conditions were fulfilled and once it is found that there was nothing in law preventing Budhalal Amulakhdas from becoming a partner in dual capacity so long as there was one or more other individuals to join in the partnership, the partnership would be valid and it could be said that the requisite conditions laid down for the purpose of the grant of registration were fulfilled and, therefore, the partnership was entitled to registration under the Act. The Tribunal has pointed out in its order that Budhalal Amulakhdas had in his individual capacity contributed fifty-one thousand rupees by way of gift from his individual account to the HUF and these moneys of the HUF were utilised in the partnership firm and thus there was separate capital contributi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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