Law:

Section:

Section 184 of the Income-tax Act, 1961 - Firm - Position prior to 1-4-1993 - Assessment year 1961-62 to 1963-64 - Whether members of two Hindu Undivided Families may enter into partnership and there is no legal bar to that effect - Held, yes - Whether, therefore, partnership-firm so constituted would be entitled to registration - Held, yes FACTS Three brothers namely, 'D', 'A' and 'O' owned a tea estate. In 1940, 'D' sold part of his share to his brother 'O'. 'D' was the karta of a HUF, the other members being his wife, and his son, 'N'. 'O' was the karta of the HUF headed by him and on his death his son, 'B' became the karta of that HUF subsequently, on the death of 'B' his son, 'D' became the karta of the HUF, the other members being 'M', wife of 'B', and 'D' and 'PA', minor sons of 'P'. A partnership deed was executed on 1-4-1960, among wife of 'D', 'N', 'P' and 'M' and thereafter by a sale deed dated 25-7-1960, tea estates owned by the HUF were transferred in favour of the partnership firm. There was no application for registration of the partnership under the Act for the assessment year 1961-62. There was, however, an application for registration for the assessment years 1962-63 and 1963-64 and for those two years registration was allowed. However, on appeal, the Tribunal that a genuine firm of four partners as stated in the deed of partnership dated 1-4-1960, was in existence during the previous years relevant to the assessment years 1961-62, 1962-63 and 1963-64. On reference : HELD In the instant case, there were two HUF. Members of the HUF may enter into partnership and there is no legal bar to that effect. So, the partnership that came into existence on 1-4- 1960, may be a genuine partnership if otherwise it was legal. By the registered deed dated 25-7-1960, Tea Estate was transferred to the partnership. Thus, all the members of the two HUF had been arrayed as vendors in the registered sale deed dated 25-7-1960, and the vendee was the partnership firm. There could not, therefore, be any illegality in this transfer. It had been mentioned in the sale deed that in pursuance of an agreement the vendors had delivered possession of the properties under sale…

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