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 1950-51 - Under a deed of partnership to carry out business of assessee-firm, first party described himself as representative of HUF - All documents were signed by first party for and on behalf of HUF in capacity as Manger and karta - In terms of partnership deed, it was not intended to make all other adult members of HUF a partner of firm - HUF later ceased to exist by reason of partition - Consequently, share of first party in profits of assessee-firm was divided between four members of family - Whether partition of HUF of first party did not affect validity of partnership or its continuance - Held, yes - Whether, therefore, application for renewal of registration of assessee-firm could not be rejected for relevant assessment year - Held, yes FACTS There were two parties to the deed to carry out the business of the assessee-firm. The first party i.e., 'O' was the representative of the HUF. The first party had signed all the documents for and on behalf of the HUF and in the capacity of Manager and Karta. The HUF ceased to exist due to partial partition. Thereupon by a deed the eight annas share allotted to the first party in the assessee-firm was divided between the four members of the family. The application of the assessee firm for registration under section 26A of the 1922 Act for the assessment year 1949-50 was granted by order of the ITO, and the income of the assessee-firm was brought to tax as the income of a registered firm. Registration of the assessee-firm for the year 1950-51 also was granted by the ITO, but the order was cancelled by the Commissioner in exercise of the power under section 33B of the 1922 Act. The Commissioner was of the view that under the deed of partnership the joint Hindu family had become a partner and as soon as the joint family status was severed the partnership deed became inoperative, since the deed 'represented a state of affairs which had become non-existent.' On further appeal, the Tribunal held that such partnership could be registered only if all the members who…

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