Law:

Section:

Section 184 of the Income-tax Act, 1961 - Firm - Position prior to 1-4-1993 - Assessment years 1960-61 to 1964-65 - There was a partition of HUF under which family business came to share of 'S' - He continued business by forming partnership firm consisting of 'S' and his family members - Capital invested in said business was joint family property received by 'S' on partition - No separate property was brought into partnership firm by partners i.e., family members - Whether on aforesaid facts, business was in fact joint family business and there was no valid partnership in law to which registration could be granted - Held, yes FACTS There was a partition in a larger Hindu undivided family by which family business came to the share of 'S'. The assets of the business were valued at Rs. 76,185, which was introduced as capital in the business. The said business was carried on under the three partnership deeds and at all stages, the partnership consisted of 'S' and his family members. The assessee-firm applied for registration for the relevant assessment years. The revenue Authorities, including the Tribunal, refused registration to the firm on the ground that the capital of Rs. 76,185, was not distributed amongst the coparceners when the partnership business was commenced. The Tribunal also observed that in the absence of partial partition amongst the co-parceners regarding the capital invested in the partnership business, there could be no legal partnership. On reference : HELD There was no evidence either of partition of the business or of the capital assets invested in it between 'S' and his sons till 1-4-1964. The so-called partnership business which was carried on under the three partnership deeds was the same business which came to 'S' in the partition of the HUF property. The sum of Rs. 76,185 which was shown to be invested as capital in the partnership business was the capital value of the business received in partition by 'S' and constituted coparcenary property of 'S' and his sons. In the absence of any partial partition amongst 'S' and his family members with reference to the business or the capital assets, the partnership business in effect was carried…

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