Case: Commissioner Of Income-Tax, Madhya Pradesh Vs. Sir Hukumchand Mannalal &amp; Co

1. A firm styled Sir Hukumchand Mannalal and Company was formed 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 of the five partners of the fine. They represented the interest of the Hindu undivided family of Sir Hukumchand and his sons. On March 31, 1950 the property of the Hindu undivided family was partitioned and the interest of the family in the partnership was taken over by a private limited company styled Sir Sarupchand Hukumchand Ltd.      2. For the assessment years 1950-51, l951-52, 1952-53 and 1953-54 the Income-tax Officer granted registration of the firm under S. 26A of the Indian Income-tax Act, 1922. In 1954-55 the Income-tax Officer declined to grant registration. 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.      3. At the instance of the Commissioner of Income-tax the following question was referred by the Tribunal:"Whether in the facts and circumstances 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 certificate granted by the High Court.

Reasoning:
5. 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 undivided family has the same liberty of contract as any other individual: it is restricted only in the manner and to the extent provided by the Indian Contract Act. Partnership is under Section 4 of the Partnership Act the relation between persons who have agreed to share the profits of a business carried on by all or any 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 firm, the Income-tax Officer is not concerned to determine in whom the beneficial interest in the share in the partnership vests, Commr. of Income-tax v. A. Abdul Rahim and Co., 55 ITR 651  = (AIR 1965 SC 1703 ); Commr. of Income-tax, Madras v. Bagyalakashmi and Co., 55 ITR 660  = (AIR 1965 SC 1708 )6. In our judgment, the High Court was right in answering the question in the affirmative.