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TMI Blog1973 (11) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... reference. On 19th February, 1954, Vandravan Purshottam was allowed to join the firm as a partner not only in his individual capacity but also as a karta of a Hindu undivided family, and the same position continued till the end of the accounting period in question, although there were other changes in the constitution of the firm by partnership deeds dated 21st March, 1958, and 5th March, 1969. The firm so constituted was registered for all these years including the year under reference. The Income-tax Officer, before whom the claim for registration of the firm for the assessment year 1959-60 was made, allowed registration under section 26A of the Act on the basis of the partnership deed dated 21st March, 1958. The Commissioner of Income-tax, Bombay City II, however, after issuing notice under section 33B of the Act, cancelled the registration of the firm and directed the Income-tax Officer to make assessment taking the status as that of an association of persons. This order of the Commissioner of Income-tax under section 33B(1) of the Act is annexed to the paper book as annexure " D " to the statement of the case. There was thereafter an appeal to the Income-tax Appellate Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deed of partnership offends either these statutory provisions or the principles governing the personal law applicable to a Hindu undivided family, then such a partnership undoubtedly cannot be regarded as valid and the order of the Commissioner cancelling the registration must be upheld. It may be mentioned here that the order of the Commissioner dated 19th September, 1961, proceeded to consider the deed of partnership dated 5th March, 1959. It is clear--and this is the admitted position--that we are really concerned with the earlier partnership deed, dated 21st March, 1958. However, it is the agreed position that as far as the questions arising before us in this reference concerning Vandravan Purshottam are concerned, the provisions in the two deeds of partnership are identical. The Commissioner for purposes of his order placed reliance on the following three cases : Hoosen Kasam Dada v. Commissioner of Income-tax, Lokenath Prasad Dhandhania v. Commissioner of Income-tax and Lachhman Das v. Commissioner of Income-tax. He also referred to the decision of the Division Bench of this court in Income-tax Reference No. 2 of 1950 earlier referred to. The Commissioner held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t exist in that case. Very strong reliance was placed by the learned counsel for the revenue on the decision of the Privy Council in Lachhman Das's case . In that case the partnership which was under consideration was one consisting of the undivided Hindu family of one Lachhman Das and his sons of the one part (one of the sons being one Daulat Ram) and Daulatram in his individual capacity of the other part. It was observed that it is well-settled that a stranger could enter into a partnership with a Hindu undivided family acting through its karta, and the Privy Council felt that it was not possible to distinguish the case of a stranger from that of a coparcener who puts into the partnership what was admittedly his separate property held in his individual capacity and unconnected with family funds. Accordingly, it was held : " ....... 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. " Mr. Hajarnavis, however, relied upon the observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invalid. As far as we are concerned, however, the matter is concluded in my opinion by the unreported decision of Chagla C.J. and Tendolkar, J. in Income-tax Reference No. 2 of 1950 (decided on 5th October, 1950). The Division Bench was concerned in that reference with the firm of Messrs. C.K. Vora Co., which prior to 1943 consisted of three partners, viz., Nemchand Popatlal, Jagatchandra Nemchand and Dholidas Doongersi. Nemchand died in April, 1943, leaving a will in which the residue of his estate was left to his grandson, Bhupendra, and he had appointed his son, Jagatchandra, as his executor. Dholidas Doongersi also died in July, 1945, and on 10th October, 1945, a new deed of partnership was executed and it was sought to be registered under section 26A. The department refused to register it, holding that the partnership deed was not validly executed 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. The Tribunal took the view that the partnership deed was valid, and this view was confirmed by the Division Bench, Chagla C.J. observing : " On the question su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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