ORDER
S. K. Mal Lodha, J. – By this consolidated order, we propose to answer the common question referred in these references.
2. DBIT Ref. No. 24/78 relates to asst. yrs. 1965-66 and 1966-67. DBIT Ref. No. 39/80 is in respect of the asst. yrs. 1967-68 to 1978-79. DBIT Ref. Nos. 26/78, 17/84, and 49/80, relate to asst. yrs. 1966-67; 1970-71 and 1971-72; and 1972-73 respectively. In DBIT Ref. No. 5/81, the assessment year involved is 1971-72.
3. The following question, which is common in the aforesaid six references, is said to arise out of the order of the ITAT, Jaipur Bench, Jaipur :
“Whether in the facts and circumstances of the case, the Tribunal was right in holding that the registration or continuation of registration could not be refused to the assessee ?”
4. Answer to this question involves finding on the question whether Virdhichand, in his capacity as Karta of HUF could take first one of his sons and, therefore, both his sons as partners even though they have not contributed anything as capital out of their self-acquired funds.
5. Learned counsel for the parties submit that a Division Bench of this court in Gulraj Poonamchand v. CIT (1984) 148 ITR 326 (Raj) after considering the arguments and submissions made on behalf of the revenue and the assessee and after going through the various authorities cited by them, held as under :
“In our view, it is permissible for a Karta of an HUF representing the HUF or any stranger who is taken in partnership even as working partner and, even if they did not contribute any separate or individual property of their own.
This view was based on CIT v. Gaekwade Vasappa & Sons (1983) 143 ITR 1 (AP) wherein, reliance was placed on I. P. Munavalli v. CIT (1969) 74 ITR 529 (Mys) which was followed in Ramachandra Navalrai v. CIT (1981) 130 ITR 826 (MP) and CIT v. Gupta Brothers (1981) 131 ITR 492 (Guj). It may be stated that Pitamberdas Bhikhabhai & Co. v. CIT (1964) 153 ITR 341 (Guj) and Shah Prabhudas Gulabchand v. CIT (1970) 77 ITR 870 (Bom) distinguished and which did not follow CIT v. Gaekwade Vasappa (supra). The basic authority in this connection, to which reference may be made is Lachman Das v. CIT (1948) 16 ITR 35 (PC) wherein it was laid down that there can be a valid partnership between a Karta of an HUF representing the family on the one hand and member of that family in his individual capacity on the other.
6. It may be mentioned that a somewhat similar view was taken in CIT v. Mariappa Mathiriyar & Sons (1985) 154 ITR 466 (Mad) wherein, the ld. Judges of the Madras High Court held that there could be a valid partnership between the Karta of an HUF and one or more of its coparceners in their individual capacity, while still remaining joint if the coparcener contributes to the partnership what is admittedly his separate property held in his individual capacity and unconnected with the family funds and such a partnership can be entered into not only for commencing a new business, but also in respect of an existing joint family business and such a firm would be entitled to registration.
7. Their Lordships of the Supreme Court in Ratanchand Darbarilal v. CIT (1985) 4 SCC 183 (SC) held that the members of a joint family or copartners can, without disturbing status of joint family or coparcenary, acquire separate property and run independent partnership business for themselves. In that connection, reliance was placed on R. C. Mitter & Sons v. CIT (1959) 36 ITR 194 (SC) and Ladu Ram Taparia v. CIT (1962) 44 ITR 52 (SC).
8. Mr. B. R. Arora, ld. counsel for the revenue is quite fair in submitting that the answer to the question involved in these cases, will be governed by Gulraj Poonamchands case (1984) 148 ITR 320 (Raj). We have carefully read the decision in Gulraj Poonamchands case (supra). Having considered the reasons given by the learned Judges, with which we agree, we hold that a Karta of HUF who represents the Hindu Undivided Family can enter into partnership with other member on members of the HUF, who is/are taken in partnership as working partner(S), though they had not contributed any separate or individual property of their own. We respectfully follow Gulraj Poonamchands case (supra). It follows from this, that Virdhichand who was Karta of HUF at the relevant time, could take his son/s as partner/s despite that his son/s as partner had not contributed anything by way of capital out of his self-acquired funds.
9. In this view of the matter, in our considered opinion, the Tribunal was right when it reached the conclusion that the registration or continuation of registration could not be refused to the assessee.
10. Our answer to the common question which has been referred in the six references before us is in the affirmative, i.e. in favour of the assessee and against the revenue.
11. In the circumstances of the case, we leave the parties to bear their own costs.
12. Let the answer be returned to the Tribunal in accordance with s. 260(1) of the IT Act, 1961 (No. XLIII of 1961).