TaxTMI 
TaxTMI 
2017 (2) TMI 543
X X X X Extracts X X X X
X X X X Extracts X X X X
....ner of Income Tax (Appeals)-3, Coimbatore. 2. Grounds taken by the Revenue are common. It assails deletion of disallowance on claim made by the assessees under Section 40(b) of the Income-tax Act, 1961 (in short 'the Act'). 3. Facts apropos are that the assessees had filed returns in the status of partnership firm for the impugned assessment year. During the course of assessment proceeding, it was noted by the Assessing Officer that the partnership firms consisted of the following partners:- In M/s Aqua Pump Industries:- S. No. Name of the Partners 1. Shri R. Kumaravelu HUF 2. The Marigold Trust 3. The Chrysanthemum Trust In M/s Aqua Sub Engineering:- S. No. Name of the Partners ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d either HUF or Trust, as per the assessees, would not mean that the partnership firms were not genuine one. The assessees also relied on the judgment of Apex Court in the case of Chandrakant Manilal Shaw v. CIT (1992) 193 ITR 1 and also that of Hon'ble Bombay High Court in the case of Ishwar Bhuvan Hindu Hotel v. CIT (2006) 281 ITR 139. The CIT(Appeals) was appreciative of the contention taken by the assessees. According to him, in the case of Ram Laxman Sugar Mills v. CIT (1967) 66 ITR 613, the Hon'ble Supreme Court had held that the karta of a HUF could enter into an agreement of partnership with another undivided family member or stranger. Further, according to him, Hon'ble Supreme Court in the case of Rashik Lal & Co. (supr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....formed. Reliance was once again laid on the judgment of Apex Court in Rashik Lal & Co. (supra). 6. Per contra, Ld. AR strongly supporting the order of the Ld. CIT(Appeals), submitted that the partnership deeds clearly provide that the partnerships were entered into by the concerned individuals. Just because they represented a trust or HUF, as per the Ld. A.R., would not make the partnership a non-genuine one. In any case, according to him, the partnership firms had acquired the status of registered firms as early as assessment year 1991-92 under Section 185(1)(a) of the Act and therefore, the Assessing Officer could not disturb a consistent position taken by the Revenue for more than two decades. 7. We have perused the orders and hear....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g clause appearing in page 2 of the partnership deed. The said clause is reproduced hereunder:- "WHEREAS, the parties hereto of the Second and Third Parts are Partners in a representative capacities respectively, representing "THE CHRYSANTHEMUM TRUST", and "THE MARIGOLD TRUST", being trusts evidenced by two indentures of Trust dated the Twentyfifth day of February, One Thousand Nine Hundred and Ninety. WHEREAS, Mr. R. Kumaravelu the party hereto of the First Part represents the Hindu Undivided Family consisting of himself, his wife and minor daughter, of which Hindu Undivided Family he is at present the Kartha." 9. In our opinion, the above clause would not ipso facto convert partnership firm as one entered between two ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons vis-a-vis other partners are determined by the Partnership Act and not by Hindu law." 10. What their Lordship held is that even if a person nominated by a HUF joins a partnership, the partnership could be deemed as one between such nominated person and other partners of the firm. The Apex Court did not hold that such partnership would only be an Association of Persons. In any case, it is not in dispute that the assessees were granted the status of registered firm by virtue of provisions of Section 185(1) of the Act since assessment year 1991- 92. The position continued for a period of twenty years and it was after such twenty years, the Assessing Officer attempted to disturb this. When a set of facts which permeates from earlier year....