1982 (6) TMI 131

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....s granted registration by the Registrar. The ITO, however, assessed the assessee in the status HUF. The quintessence of the order of the ITO is as follows: In the absence of any partition in the family and order under section 171, the coparceners of the HUF cannot for a separate registered firm and are not entitled to any benefit of registration. This is supported by the decision reported in 77 ITR 870, 29 ITR 521 (SC) in the case of Bhagat Ram Mohanlal. On merits, he rejected the book results of the assessee and applied a gross profit rate of 14 per cent on the total sales estimated at Rs. 1,90,000 as against the gross profit rate of 10 per cent on the sales of Rs. 1,85,746 shown by the assessee. This is how, an addition was made of ....

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.... agreement would be valid. From the authority of the Privy Council, it clearly appears that a coparcener can become a partner with the Karta carrying on the joint family business, provided he utilises his separate property as capital of the firm. In the instant case, Shri Kailashchand, who is a coparcener, became partner in the firm with Shri Mangilal, Karta without utilising his separate property as capital of the firm. But the argument of Shri Ranka is: he was taken in as a working partner and contribution by working partner of his skill and labour is as good as contribution of the separate property. A copy of the partnership deed is on pages 8 & 9 of the paper book. Clause 8 of the said deed declares that parties shall be honest and they....

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....skill or labour or both as the case may be. If the partnership is permissible in one case, it would be difficult to assign any reason for reading the conclusion that it is not permissible in the other." 3. No doubt, (1969) 74 ITR 529 (Mys) was not followed by Hon'ble Bombay High Court in [1970] 77 ITR 870 (Bom.). But, following a golden principle of law that when two plausible views are available, then the view more favourable to the assessee be followed, I hold that the issue arising before me has been fully answered by the Hon'ble Mysore High Court in (1969) 74 ITR 529 (Mys) and that has to be followed in the case of the assessee. Following the said authority, I accept the contention of the assessee that the agreement of partnership wa....