Law:

Section:

Section 184 of the Income-tax Act, 1961 - Firm - Registration - Entitlement to - Assessment year 1971-72 - Whether a karta of a HOT can enter into partnership with coparcener, who contributes his labour and skill instead of separate capital to partnership, and such partnership is entitled to registration - Held, yes FACTS B, karta of a HUF, entered into a partnership with his son S, a coparcener in the HUF. The partnership firm was granted registration for the assessment years 1964-65 and 1965-66. In the assessment year 1971-72, the ITO observed that the coparcener S did not contribute any capital to the partnership firm and, on that ground, he cancelled the registration. His order was confirmed by the AAC, but was reversed by the Tribunal, on second appeal. On reference: HELD There was a clear finding by the Tribunal that S was a genuine partner and that he contributed his labour and skill to the partnership firm. In view of the decision of the Madhya Pradesh High Courtin Ramchand Nawalrai v. CIT [1981] 130 ITR 826, coupled with the views expressed by the Supreme Court in Ratanchand Darbarilal v. CIT [1985] 155 ITR 720, it was to be held in the instant case that in law and on facts there was no bar on the karta B to enter into partnership with the coparcener S and consequently the registration was not liable to cancellation. The order of the Tribunal was to be upheld. CASE REVIEW Ratanchand Darbarilal v. CIT [1985] 155 ITR 720 (SC) and Ramchand Nawalrai v. CIT [1981] 130 ITR 826 (MP)followed & relied upon. CASES REFERRED TO Ramchand Nawalrai v. CIT [1981] 130 ITR 826 (MP) and Ratanchand Darbarilal v. CIT [1986] 155 ITR 720 (SC). Ashok Bhan and Ajay Mittal for the Applicant. D.K. Gupta for the Respondent. ORDER Sodhi, J. -The two questions of law referred for the opinion of this Court read as under: "1.Whether, on the facts, the Tribunal has been In error in law in holding that there is no legal bar on the 'karta' of a Hindu undivided family to enter into a partnership with a coparcener of his own family? 2.Whether, on the facts, the Tribunal has been in error in law in holding that the Appellate Assistant Commissioner rightly reversed the Income-tax…

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