COMMISSIONER OF INCOME TAX V. BHADIAD INDUSTRIES

ITR/144/1995

AI Insights

The case revolves around the Commissioner of Income Tax's challenge against the registration of Bhadiad Industries as a partnership firm. The dispute centered on the legal validity of having partners in dual capacities—both as individuals and as representatives of their respective Hindu Undivided Families (HUFs). The Income Tax Officer (ITO) was directed by the Appellate Tribunal to grant registration, which was contested by the revenue. The High Court, referencing the Supreme Court's decision in CIT vs. Kandath Motors, upheld the Tribunal's decision, emphasizing that such dual capacity partnerships are permissible under Indian law.

• Counselvise Citation: [2001] 140 COUNSELVISE.COM (IT) 677546 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 16-01-2001
• Assessment Year: misc
• Other Referred Cases: CIT vs. Kandath Motors
• Laws Referred To: Indian Partnership Act, 1932, Indian Contract Act, 1872
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: B B NAIK; MANISH BHATT
• Keywords: Income Tax; Partnership Registration; Dual Capacity Partnership
• Section: 224 ITR 663

Judgement Text

" IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 144 of 1995 For Approval and Signature: Hon'ble MR.JUSTICE J.M.PANCHAL and Hon'ble MR.JUSTICE M.S.SHAH ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements? 2. To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus BHADIAD INDUSTRIES -------------------------------------------------------------- Appearance: MR BB NAIK with MR MANISH R BHATT for Petitioner NOTICE SERVED for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE J.M.PANCHAL and MR.JUSTICE M.S.SHAH Date of decision: 16/01/2001 ORAL JUDGEMENT (Per : MR.JUSTICE M.S.SHAH) In this reference at the instance of the revenue, the following question is referred to us in respect of Assessment Year 1986-87 :- \"Whether the Appellate Tribunal is right in law and on facts in directing the ITO to grant registration to the assessee firm when two persons were partners in dual capacity i.e. one in their individual capacity and the other representative of their respective HUF ?\" 2. We have heard Mr BB Naik, learned counsel for the revenue. The learned counsel agree that the controversy raised herein is concluded by the decision of the Apex Court in CIT vs. Kandath Motors, (1997) 224 ITR 663 wherein the Apex Court has held that a person can be a partner in a partnership firm in his individual capacity and again in another capacity. In the facts of that case, the concerned assessee was a partner in his individual capacity and also as representing the three heirs of a deceased partner. The said assessee had signed partnership agreement in his individual capacity as well as representing heirs of the deceased. The Apex Court has held that there was nothing in the Indian Partnership Act, 1932 or the Indian Contract Act, 1872 which prevented the agreement of this nature and that the validity of the partnership could not be doubted when there were other partners as well. The Apex Court has also held that if the legal representative of the deceased is also one of the surviving partners, he can agree to join the new partnership as a nominee of the legal heirs of the deceased partner. Applying the aforesaid principles, we have no hesitation in holding that the registration could not be refused to the partnership firm in question merely on the ground that two persons were partners in dual capacity i.e. one in their individual capacity and the other representative of their respective HUF. 3. In view of the above decision, we answer the question in the affirmative i.e. in favour of the assessee and against the revenue. The reference accordingly stands disposed of with no order as to costs. (J.M. Panchal, J.) (M.S. Shah, J.) sundar/- "