Law:

Section:

Section 184 of the Income-tax Act, 1961 - Firm - Registration - Entitlement to - Whether there is any disability for members of an HUF in the matter of entering into a contract of partnership inter se or with a stranger, or between some members of HUF and some strangers so as to disentitle such partnership from registration - Held, no Facts The assessee-firm had four major partners, namely, M, L, U, and V. M entered into the partnership representing the HUF of which he was of the karta. L and U were major members of the said HUF but they joined the partnership firm in their individual capacity and were working partners. The only other partner, namely V, was an outsider. Two minors were also admitted to the benefits of the partnership. For the assessment year 1968-69 the assessee-firm claimed registration under section 184 which was allowed by the ITO. But the Additional Commissioner, exercising his powers under section 263, cancelled the registration of the firm on the ground that the firm was not validly constituted. On appeal, the Tribunal, however, accepted the assessee's claim and held that there was no disability with the members of HUF in the matter of entering into a partnership with a stranger and the fact that the two minors were admitted to the benefits of the partnership had not in any way invalidated the constitution of the partnership firm. On reference : Held It is clear from the decision of the Supreme Court in CIT v. Sir Hukum Chand Mannalal & Co. [1970] 78 ITR 18 that there is no disability for the members of an HUF in the matter of entering into a contract of partnership inter se or with a stranger or between some members of an HUF and some strangers. A member of an HUF is at liberty to contract with any other individual including other members of the HUF, subject to the restrictions provided by the Indian Contract Act. The Rajasthan High Court also took the view, in the case relating to the assessee for the assessment year 1970-71 (IT Reference No. 3 of 1976, decided on 18-1-1985) that the assessee was validly constituted and was entitled to registration under section 185. There was no reason to take a different view when the assessee was…

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