Law:

Section:

Section 184 of the Income-tax Act, 1961 (Corresponding to section 26A of the Indian Income-tax Act, 1922) - Firm - Position prior to 1-4-1993 - Assessment year 1959-60 - Whether where one of partners signed partnership in two capacities, one as an individual and other as karta of HUF, partnership could not be held to be invalid so as to refuse registration - Held, yes FACTS In the year 1959 one of the partners 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. The firm so constituted was registered for all those years including the year under reference. The ITO before whom the claim for registration of the firm for the relevant assessment year was made, allowed registration under section 26A of the 1922 Act on the basis of the partnership deed dated 21-3-1958. The Commissioner however, after issuing notice under section 33B of the 1922 Act cancelled the registration of the firm and directed the ITO to make assessment taking the status as that of an association of persons. The Tribunal set aside the order of the Commissioner with the result that the original order of the ITO granting registration had remained effective. On reference : HELD The validity of a partnership would have to be decided with reference to the express provisions of the Indian Partnership Act, and, in a case such as the one in the instant case with further reference to the principles of Hindu law. If it can be shown that 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 does not appear to be the correct position in law to state that all contracts between a person A, and A and others would be invalid. Reference may be made in this connection to the provisions of section 46 of the Indian Partnership Act, 1932, where a partner may enforce as against the firm of which he is a partner certain…

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