Commissioner Of Income-Tax, Madhya Pradesh v. Sir Hukumchand Mannalal & Co

646 · COMMISSIONER OF INCOME-TAX, MADHYA PRADESH SIR HUKUMCHAND MANNALAL & CO. July 20, 1970 . (J.C. SHAH AND K. S. HEGDE, JJ.) . Income-tax Act, 1922, S. 26-A-Partnership including two partners rcprescnting interest of same H.U.F.-If can be registered-Whether memhers of H.U.F. suffer from any disability from entering into contract inter-s..:. H and his son R were two out of the five partners of the respondent firm and represented the interest of a Hindu undivided family. The Income-tax Officer granted registration of the firm under s. 26A of the Incomo·tax Act, 1922. Jn 1954-55, he declined to grant such registration. The Appellate Assistant Commissioner confirmed his order on the ground that two coparceners could not represent the interest of the H.U.F. in a partnership. The Tribunal reversed this order and the High Court. upon a reference o~ the question whether the respondent firm could be granted registration, answered it in the .affirmative. On appeal to this Court, HELD : Dismissing the appeal~ fhat a partnership in which two members of a coparcenary represent same beneficial intere't of an H.U.F., may be validly registered under the Income Tax. [648 C.DJ P_am Laxman Sugar Mills v. C~nmissioner of Income-tax. U.P. and Anr. 66 I.T.R. 613, P. K, P. S. Pichappa Chittiar & Ors. v. Chokalingam Pi/ltU & ms. A.I.R. (1934) P.C. 192 and Charandas Haridas & Anr. v. Commissioner o/ Income-tax, Bombay North, Kutch and Saurashtm. Ahmedal>ad & Anr. 39 I.T.R. 202, referred to. The Indian. Contract Act imposes no disability upon members of a Hindu undivided family in the matter of entering into a contract inter u or with a stranger. A member of a Hindu undivided family has the same liberty of contract as any other individual : it is restricted only in tho manner and to the extent provided by the Indian Contract Act. [648 HI It i; now settled law that in considering an application for registration of a firm, Lhe Income-tax Officer is not concerned to determine in whom the beneficial interest in the share in the partnership vests. [649 Bl Commissioner of Income-tax v. Abdul Rahim & Co. SS I.T.R. 651 and Com111i«sianer of Income-MX, Madras v •. Bagyalakshmi & Co. 55 I.T.R. 660, rofetT'Cd to. · CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1774 of' 1969. Appeal from the judgment and order dated February 12, 1965 of the Madhya Pradesh High Court in Misc. Civil Case No. 112 of 1963. S. Mitra, R. N. Sachthey and B. D. Sharma, for the appellant. M. C. Chagla, R. N. Banerjee, A. K. Verma and 0. C. Mathur, for the respondent. The Judgment of the Court was delivered by Shah, J, A firm styled Sir Hukumchand Mannalal & Com-pany was fonned under a deed dated July 16, 1948 to carry on the business of "managing and selling agents" of Hukumchand Mills Ltd. Sir Hukumchand and his son Rajkumar Singh were two o( the five partners of the firm. They represented the interest of the Hindu undivided family of Sir Hukumchand and his sons. c On March 31, 1950 the property of the Hindu undivided family wu partitioned and the interest of the family in the partnership wu taken over by a private limited company styled Sir Sarup-chand Hukumchand Ltd. For the assessment years 1950-51, 1951-52, 1952-53 and 1953-54 the Income-tax Officer grante<l. registration of the firm D Wider s. 26A of the Indian Income-tax Act, 1922. In. 1954-55 the InCom.e-tax Officer declined to grant registratl6n. In appeal the Appellate Assistant Commissioner confirmed the order on the ground that two coparceners could not represent the interest of the Hindu undivided family in a partnership. The Tribunal reversed the order. They held that.Sir Hukumchand and his son Rajkumar Singh were partners in the firm on behalf of the Hindu undivided family and there was nothing in law which prevented two or more coparceners of a Hindu undivided family representing the family from entering into a partnership with a stranger or strangers. ART aaa, HET TT |aqarT SHAS AAA WS RETA (The Commissioner of Income-tax, Madhya Pradesh ~ Hukumchand Mannalal and Co.)|(20 wats, 1970) (Fao Ho Ato ME AIR Fo THo BT) gfesaa gana tea ac, 1922 (1922 at 11)--eTa. 26-u—vea at farg afanaa sera & fea at ofafafaca wet atea anitearct at fae Ht sat wart —cat aniterdl a faferareaeq & taecinn frat at ana ¢—feeg wlanaa Hera H aaeyafar afafran ar woafeaa tft a ate facare aH aaA at agrare aft gaat ga usage fag sei ad F otaaaard Aa at anftereawie a feg afanat sera hefar arsfafaface wza 31 arrae afpard & geHa-saa daz, 1922 a aret26-0mela wa at Ufsreciaa wx fears wT 1954-55 F sar tarcaeHUT STATPT He feat 1 agraH wigaa (atta)7 saymea at sa rare Ge gfee Hr ay fe at agarfan feat aniard Ffag. ufanat Hera ar sfafafaca al wt aad afsaen F saarea ay sae fearate gases Ffafet fea arm oe fe armeray wr at Uttar fear at aHaT al Sey raTaTag F GHIAsatatta fear aftr1 saa ea fata gu, & fase ca caravaaa Ft adhe| feu wa: az_afaftatica—tet aniterét ah, fara Prat aearfaat & at aceroan a fee afaaar sera F craame fea ar sfafafaca eee 2, war-dqrtae 3 att fafrara wq8 <faedteafear orapart@ i (Tz4) boys [1934]To Miso WITo 1934 to ato 192:|to Ho To Uae faa Afars we seqTATA Stations facet site wea|.(P.K.P.S. Pichappa Chettiar and OthersVs. ChokalingamPillai and Others),4 fafaa aiict afeerfer: 1969 at fafaa acta dem 1774. 1963 % satel fafaa ate dear 112 # ase gee esq arora Harta 12 grad, 1965. ay fare ate mea % fees atta1 MATaTAT Bt BIT a. aaa Tao faaT, Mo Uo Tas FIXato gto wat TAA Ht ste aaaa ThoGlo GTA, Ato UO|TA, Yo Ro autPieBloatoAAT| sarmat at Freia earatfrafs So ato ae F fear) warafaata me— ean ara face fafaes F sara ate faaa afeeaiay a azarBa F fay ay eHA ave ararera wos Heat. F ahaa aray wTgi ada 16 gard, 1948 & fate } gels facfaa at ae gt1 axepraa at Saar Ga TAKA fag we Foie aA AI,q at Rasa AI sas gal H fare alana gerq3B fea wrsfafataca wet & t arta 31 ard, 1950 a ferg afanaa ger atarate ar faaraa fear aa ate anitant % sera F feat at axeaertaee grace fafats & afaata avait wa srete fafats wrtTat sasa fears| 2.1950-51,1951-52,1952-53wie1953-54 azfratea auf & fac aranx afgeret & afosaay sepa Zaa Gaz, 1922al attr 26(1) & seta wa ar eirettaeo Aa wefeat1 1954-55H arate ofan &<fredtecn at a gare at feari adiea agian argad (vita) & arta al ge arene at gfe at a feai = -seaaH araraa faua afaat =[1975] 4 BAe ft qo agaltaa ariardt & fee alana serafea ar ofafafaca ad araad | afaawy A mes A gaze fearsea agafafaaifer fearfe at ggnaea att Gah ga aRMe fag fer afenaa geea aWe a HHH arate F ate fais F Cat ws ava al 2 at HEET FYsfafataea ara are fers fanaa aera & at or fas agaifaal a| feat arg eafea agar cafsaal & ara ariterdt axa & faatfzaHUG at 3.WITH argad HL Sea Tt afsaw a farafafaa gaafatfaa frar— Fay ATA B aeat H grate ge ae afefeafeat A qFCHUA YoS AeA aTA Bra BI Tae FT ga 2c # elatsaediee featat aear at?”SeI TAA A GV FT AMUAH yar fears gaAKaigad 4SHI AAMT FIT ATTA AAAI F Za qaag Hada ssi 4.UT ren are fee aaa BERT aTAaT, Tat gee AKUe aryl F eg eqarag 4 ag wa aaa frat e— “alg fog afawat pera xX xXX XX X Efisaa aTaaa tae & aatada um ‘cafia’ z fee oe adt sateal H farearaaena eatat agt@ att ag ar at feat ara afanaa ‘hers% agar cafe Bara qiiterd wr wae aA Bt awat | BfeaaTfarg Gera % ofafafa % wr FH gaeas (wal) wea afta F araanilart gay He far UT HL awa et sa aM A urilerst auxmarry (HT) Fate weg agfer Baye ar2 ate aviterdtPUT AIT Hal F faara, Hera Hr A Teer wiles FH arsataart waar fee afsa adt azar. g2ra & afaes azeqwaieanit face ag aiar ac ana2 fe arte & ara a agar at afsaaa pera at afer aaa ate feeg & atiaitt %afar ar sata wea ar erat adh BT aay ate a at arftard & eT A ard at aaa g 1” aigaast ait a fats at feafa oe ag faarevet Pear aa 2|fReg ag fades frat qar 2 fe afH agerisat % at azeq we HF fagafaata Fara & UH a Graaise fea st afafahrea ww Fax ahs At the instance of the Commissioner of Income-tax the follow-ing question was referred by the Tribunal : F "Whether in the facts and circlllllStances of the case the firm Hukumchand and Mannalal Company could be granted registration under s. 26A of the Act ?" The High Court answered the question in the affirmative. The CommiSsioner of Income-tax has appealed to this Court with G certificate granted by the High Court. [n Ram Laxman Sugar Mills v. Commissioner of Income-tax, U.P. and Anr.([1]) this Court observed: "A Hindu undivided family is x x x x a "person" within the meaning. of the Indian Income-tax Act : it is however not a juristic person for al! purposes, and can-not enter into an agreement of partnership with either (I) 66 I.T.R. 613. another updivided family or individual. It is open to the manager of a joint Hindu family as representing the family to agree to become a partner with another persort. The partnership agreement in that case is bet-ween the manager and the other person, and by the part-nership agreement no member of the family except the manager acquires a right or interest in the partnership. The junior members of the family may make a claim against the manager for treating the income or profits received from the partnership as a joint family asset, but they cannot claim to exercise the rights of partners nor be liable .as partners." This position in law was not disputed on behalf of the Commis-sioner. But it was urged that smce two members of a coparce-nary represented in the firm the same beneficial interest of u Hindu undivided family, and since they were incompetent to enter into a contract inter se, the partnership agreement could not be. registw;d. There is no substance in that contention. In P. K. P. S. Pichappa Chattiar & Ors. v. Chokalingam Pillai & Ors.(') the Judicial Committee obsered, approving the obser· vations made in Mayne's Hindu Law (9th Edn.) at p. 398 to the following effect : · "Where a managing ' member of a joint family enters into a partnership with a stranger the other mem-bers of the family do not ipso facto become partners in the business so as to clothe them with all the rights and obligations of a partner as defined by the Indian con· tract Act, in such a case the family as a unit does not become a partner, but only such of its members as in fact enter into a contractual relation with the stranger : the partnership will be governed by the Act." It is clearly enunciated that one .or more members of a Hindu undivided family may enter into a contractual relation in the nature of a partnership with a stranger and they qua the stranger become partners. The view expressed by the Judicial Committee was approved by this Court in Charandas Haridas & Anr. v. Commissioner of Income-tax, Bombay North. Kutch and Saurash-G tra, Ahmedabad & Anr. ([2]). The Indian Contract Act imposes no disability upon members of a Hindu undivided family in the matter of entering into a contract inter se or with a stranger. A member of a Hindu un-divided family has the same liberty of contract as any other in-dividual : it is restricted only in the manner and to the extent H provided by the Indian Contract Act. Partnership is under s. 4 (1) A.T.R. (1934) P.C. 192. (2) 39 1.T.R. 202. A of the Partnership Act the relation between persons who have agreed to share the profits of a business carried on by all or 1ny of them acting for all : if such a relation exists, it will not be invalid merely because two or more of the persons who have so agreed are members of a Hindu undivided family. It is now settled law that in considering an application for registration of a fim1, the Income-tax Officer is not concerned to determine in B whom the beneficial interest in the share in the partnership vests : Comrrtissioner of /11comc-tax v. A. Abdul Rahim & Co. ([1]); Com-missioner of Income-tax. Madras v. Bagyalakshmi & Co.<2). h; our judgment, the High Court was right in answering the question in the affirmative. c The appeal fails and is dismissed with costs. a ara a afar awa % fae aera g aa: artaHerz, efaedtaa,vat fear or amar| sa celta H ars are aA Ti MoFodtoutofae Sfgare site ea aera aAanferra fees att aa H GAfaaamaal {da cia fae ar (Tat senza) F Ws 398 aaarfy-aafeaal ar aquled Bw gu fara wa Br aa TagPe“sa afanaa Hara Hr Heat argy eafsa @ wala Har@ at Hera H yee aaeq eae: HIATT Ho wrMere ash aa HIT| fad fe aed arcdta efaar afafaae & aarafearfsaariter<&Ber at ¥ afeaz era anitare ate areqare adl aa stea star aét afew at ard, gah 23 Rat aad VI F aed zag|witart Tag F Tt sega: aEsalsaF afaany arareeaifat ara J — deat aritardd afefaaa gre afaa sit 1”we enced: sfanfear fear ward fe fag afanaa aera atuwaar ufan acca aed aafaq % ara anitard at sala wr afaarenaeae eanfrg ee.aaa Sac 3 are afer F are F afar aaama&1 galfara what rer afaeaat cfeemte ar gaeataT Faumara efter att UH Bea TATA BHTalga, Tartl ray,avo wie ates, agnatarewit gH ae? 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