TaxTMI 
TaxTMI 
1992 (9) TMI 135
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....bunk was situated at Jogipet, Dist. Medak. Shri Veereshalingam was assessed in the status of bigger HUF. A partial partition of the family business and movables took place on 12th Nov., 1966. From then onwards, the eldest son Shri M. Krishnamurthy has been carrying on business separately and Shri M. Veereshalingam has been carrying on business as Caltex dealer on behalf of the smaller HUF. In view of the partial partition referred to above Manik Rao was only a minor and his mother represented him in partial partition. The partial partition took place in the family was recognised by the ITO in asst. yr. 1968-69 by means of his specific order passed under s. 171 of the IT Act. From 6th Nov., 1972 Shri M. Manik Rao having become a major joined the firm as partner along with his father's HUF and began helping him in the Caltex Oil bunk business. On 18th July, 1975, Shri M. Veereshalingam representing his own minor HUF comprised of himself, his wife and one minor daughter and Shri M. Manik Rao comprising his own HUF joined as partners and began carrying on business from 6th Nov., 1972. On 18th Nov., 1973 they entered into a partnership by means of a partnership deed, copy of which is fu....
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.... 11,350 for asst. yr. 1983-84. The returned incomes were accepted under s. 143(1) of the IT Act by the ITO for both these assessment years by his orders dt. 27th March, 1986. Subsequently these two assessments were taken up for scrutiny by the CIT, A.P. II, Hyderabad. A notice given by her under s. 263 was furnished at pages 9 and 10 of the paper compilation. The text of the notice given as far as it is relevant for our purpose is the following: "For the asst. yr. 1982-83 and 1983-84 you have filed your income-tax returns on 30th March, 1985. In the statements of computation of total income enclosed to the above returns for both the assessment years you have claimed deduction being 1/2 share belonging to Sri M. Manik Rao, individual. As per the note enclosed to the asst. yr. 1982-83 the firm M/s Veereshalingam carried on business as Caltex dealer till the death of your father. Upto the death of your father there was a contract between you and your father and, therefore, there was a registered firm which carried on business as dealer in Caltex. After the death of your father the properties belonging to him devolved on you. The business which was previously done by the firm has been....
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....posed saying that the difference did not arise for the first time during the accounting year relevant to asst. yr. 1982-83 or 1983-84 but difference are coming from 1980-81 assessment year onwards. The learned CIT in her impugned orders dt. 11th Nov., 1987 for asst. yrs. 1982-83 and 1983-84 did not agree with the objections raised in the reply submitted by the assessee to the notice under s. 263 served on it. Adverting to the objections in her impugned order, the learned Commissioner(A) stated that the business carried on is single and composite one. The fact that the other legal heirs of late Shri Veereshalingam relinquished their rights in respect of capital of Rs. 48,459.80 in favour of the assessee nearly means that there has been a kind of gift nature. The original difference as well as the differences occurring in the balance sheet for the years ending 27th Oct., 1981 and 16th Dec., 1982 should have been treated as part of assessee's income. For the above defects, the learned CIT, AP.II, Hyderabad set aside the assessment orders framed under s. 143(1) for asst. yrs. 1982-83 and 1983-84 and directed the ITO to redo the assessment according to law. 4. The facts relating to ass....
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....very depositor does not get a share in the profits." Thus he passed his revisionary order dt. 17th Jan., 1989 by which the successor Commissioner has set aside the assessments for 1985-86 and 1986-87 and directed the ITO to redo the same in accordance with law. These two sets of revisionary orders are now being challenged before this Tribunal in second appeals. Since the assessee is one and the same and since the points involved in all these appeals are common they can be taken up together and disposed of by a common order. 5. We have heard Shri K.V.S. Bhaskara Rao, learned advocate for the assessee and Shri D.U.V.G.V. Raghava Rao, the learned Departmental Representative. Two contentions were raised by Shri K.V.S. Bhaskara Rao. Firstly he contended that after the death of Shri Veereshalingam, having regard to the facts and circumstances of the case, it should be deemed that Shri Manik Rao, HUF now the assessee before us has carried on the business with Shri M. Manik Rao (individual) who is a person under s. 2(31) of the IT Act. Under law nothing prevents a coparcener investing his individual funds and carrying on a partnership business along with his HUF. From the facts and circu....
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....support of his proposition, the assessee relied on the Bombay High Court's decision CIT vs. Mohinidevi Mohunte reported in (1988) 171 ITR 557 (Bom). 6. The learned Departmental Representative opposed the arguments of Shri K.V.S. Bhaskara Rao and held that neither of the two has any force and they cannot stand judicial scrutiny. Cases cited in support of the assessee are all distinguishable and hence the ratios of those decisions do not apply. The learned Departmental Representative contended that firstly it is important to know that there cannot be a valid partnership by the assessee Shri M. Manik Rao as Karta of the HUF and Shri M. Manik Rao as Individual especially in a case where there are only two alleged partners in a firm. Secondly it is most important to know that after the death of Shri Veereshalingam, there is no partnership deed as such which came into existence and in the absence of any partnership deed being in existence it is futile to argue that there is a deemed partnership between the assessee HUF and Shri M. Manik Rao (Individual). The cases relied upon by the assessee are all distinguishable inasmuch as in such cases there are plurality of persons or persons more....
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....uing the records of the case, we are of the opinion that the assessee has no case and the arguments advanced on behalf of the assessee have no force and are to be rejected for the reasons set out below. Firstly, it is contended that there can be a valid partnership deed between the assessee HUF and one of the coparceners of the assessee HUF provided he invested his individual funds in the business. We are of the view that this contention is not correct. Firstly, there is no partnership deed as such in this case, before pursuing the argument that there can be a valid partnership between a Karta of HUF and the Karta as individual. Unless there is a valid partnership deed there is no scope even to consider this contention. In this connection we may cite the decision of the Allahabad High Court in Mohan Lal Shyam Lal, In re reported in (1942) 10 ITR 219 (All). In that case it was contended that a compromise entered into between parties though some of the parties to the suit were minors amounted to an instrument of partnership. In that case Lala Baijnath Das purported to have entered into a partnership in dual capacity--for himself as well as guardian of the minors. The contention was n....
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....e transaction, two different capacities : one as representing the interests of the family and the other as representing his private interests. These two capacities might in certain conceivable circumstances be in conflict. The partnership in that case was, therefore, rightly disallowed." That was where there was a partnership actually entered into though by the same person in two different capacities. However, in the facts before us there is no such partnership deed at all. Therefore, we hold that applying the ratio of the Patna High Court's decision in Lokenath Prasad Dhandhania's case, there cannot be any valid partnership by the same individual in two capacities since conflict would be conceivable in certain circumstances. 9. In CIT vs. Budhalal Amulkhdas the Gujarat High Court holds the view that an individual can execute a partnership deed in two capacities, one as individual and the other as representative of an HUF. However, in this case, partnership was entered into by at least 4 persons. Apart from a single person executing the partnership in two capacities, there are two other partners and all of them executed a partnership deed. However, in this case there is no partne....
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....the facts of the present case on hand. In that case, the assessee's late husband was a partner. When he died he left the assessee three sons and a daughter. The assessee was admitted as a partner along with G and R as the other partners. One of the sons after he attained majority also became a partner in the firm. Clause 6 of the partnership deed clearly stated that the capital requirements of the firm would be met with by the assessee as well as G and the credit balances in the capital account of the assessee's late husband which had devolved upon his legal heirs was considered to be the capital of the assessee contributed to the firm. Therefore, at the time of entering into partnership itself all the partners of the firm knew that the capital contributed to the firm not only belonged to the assessee but also to other heirs of her late husband. The assessee claimed that she only had 1/3rd of what was received by her as business profits from the firm and that only be considered in her hands and the remaining 2/3rds should be considered as the income of the other heirs of her husband. This was ultimately granted by the High Court. However, that is not the case here. Firstly, there w....