# · COMMISSIONER OF INCOME-TAX, MADHYA PRADESH v. SIR HUKUMCHAND MANNALAL & CO

- **Citation:** [1971] 1 S.C.R. 646
- **Court:** Supreme Court of India
- **Decided:** 1970-07-20
- **Case number:** Civil Case No. 112 of 1963
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-madhya-pradesh-v-sir-hukumchand-mannalal-co-5107
- **Pages:** 4

## Headnote

646
· COMMISSIONER OF INCOME-TAX, MADHYA PRADESH
v.
SIR HUKUMCHAND MANNALAL & CO.
July 20, 1970
. (J.C. SHAH AND K. S. HEGDE, JJ.)
. Income-tax Act, 1922, S. 26-A-Partnership
including two partners
rcprescnting interest of same
H.U.F.-If can be
registered-Whether
memhers of H.U.F. suffer from any disability from entering into contract
inter-s..:.
H and his son R were two out of the five partners of the respondent
firm and represented the interest
of a Hindu
undivided
family. The
Income-tax Officer granted registration of the firm under s. 26A of the
Incomo·tax Act, 1922. Jn 1954-55, he declined to grant such registration.
The Appellate Assistant Commissioner confirmed his order on the ground
that two coparceners could not represent the interest of the H.U.F. in a
partnership. The Tribunal reversed this order and the High Court. upon
a reference o~ the question whether the respondent firm could be granted
registration, answered it in the .affirmative.
On appeal to this Court,
HELD : Dismissing the appeal~
fhat a partnership in which two members of a coparcenary represent
same beneficial intere't of an H.U.F., may be validly registered under the
Income Tax. [648 C.DJ
P_am Laxman Sugar Mills v. C~nmissioner of Income-tax. U.P. and
Anr. 66 I.T.R. 613, P. K, P. S. Pichappa Chittiar & Ors. v. Chokalingam
Pi/ltU & ms. A.I.R. (1934) P.C. 192 and Charandas Haridas & Anr. v.
Commissioner o/ Income-tax,
Bombay North, Kutch and Saurashtm.
Ahmedal>ad & Anr. 39 I.T.R. 202, referred to.
The Indian. Contract Act imposes no disability upon members of a
Hindu undivided family in the matter of entering into a contract inter u
or with a stranger.
A member of a Hindu undivided
family has the
same liberty of contract as any other individual : it is restricted only in
tho
manner and to the extent provided by the Indian Contract Act.
[648 HI
It i; now settled law that in considering an application for registration
of a firm, Lhe Income-tax Officer is not concerned to determine in whom
the beneficial interest in the share in the partnership vests. [649 Bl
Commissioner of Income-tax v. Abdul Rahim & Co. SS I.T.R. 651 and
Com111i«sianer of Income-MX, Madras v •. Bagyalakshmi & Co. 55 I.T.R.
660, rofetT'Cd to.
·

## Text

646
· COMMISSIONER OF INCOME-TAX, MADHYA PRADESH
v.
SIR HUKUMCHAND MANNALAL & CO.
July 20, 1970
. (J.C. SHAH AND K. S. HEGDE, JJ.)
. Income-tax Act, 1922, S. 26-A-Partnership
including two partners
rcprescnting interest of same
H.U.F.-If can be
registered-Whether
memhers of H.U.F. suffer from any disability from entering into contract
inter-s..:.
H and his son R were two out of the five partners of the respondent
firm and represented the interest
of a Hindu
undivided
family. The
Income-tax Officer granted registration of the firm under s. 26A of the
Incomo·tax Act, 1922. Jn 1954-55, he declined to grant such registration.
The Appellate Assistant Commissioner confirmed his order on the ground
that two coparceners could not represent the interest of the H.U.F. in a
partnership. The Tribunal reversed this order and the High Court. upon
a reference o~ the question whether the respondent firm could be granted
registration, answered it in the .affirmative.
On appeal to this Court,
HELD : Dismissing the appeal~
fhat a partnership in which two members of a coparcenary represent
same beneficial intere't of an H.U.F., may be validly registered under the
Income Tax. [648 C.DJ
P_am Laxman Sugar Mills v. C~nmissioner of Income-tax. U.P. and
Anr. 66 I.T.R. 613, P. K, P. S. Pichappa Chittiar & Ors. v. Chokalingam
Pi/ltU & ms. A.I.R. (1934) P.C. 192 and Charandas Haridas & Anr. v.
Commissioner o/ Income-tax,
Bombay North, Kutch and Saurashtm.
Ahmedal>ad & Anr. 39 I.T.R. 202, referred to.
The Indian. Contract Act imposes no disability upon members of a
Hindu undivided family in the matter of entering into a contract inter u
or with a stranger.
A member of a Hindu undivided
family has the
same liberty of contract as any other individual : it is restricted only in
tho
manner and to the extent provided by the Indian Contract Act.
[648 HI
It i; now settled law that in considering an application for registration
of a firm, Lhe Income-tax Officer is not concerned to determine in whom
the beneficial interest in the share in the partnership vests. [649 Bl
Commissioner of Income-tax v. Abdul Rahim & Co. SS I.T.R. 651 and
Com111i«sianer of Income-MX, Madras v •. Bagyalakshmi & Co. 55 I.T.R.
660, rofetT'Cd to.
·
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1774 of'
1969.
Appeal from the judgment and order dated February 12, 1965
of the Madhya Pradesh High Court in Misc. Civil Case No. 112 of
1963.
••
CJ
E
F
G'
H
A
c
D
F
G
H
C.I.T. v. HUKUMCHAND (Shah, /,)
647
S. Mitra, R. N. Sachthey and B. D. Sharma, for the appellant.
M. C. Chagla, R. N. Banerjee, A. K. Verma and 0. C. Mathur,
for the respondent.
The Judgment of the Court was delivered by
Shah, J, A firm styled Sir Hukumchand Mannalal & Company was fonned under a deed dated July 16, 1948 to carry on
the business of "managing and selling agents" of Hukumchand
Mills Ltd. Sir Hukumchand and his son Rajkumar Singh were
two o( the five partners of the firm. They represented the interest
of the Hindu undivided family of Sir Hukumchand and his sons.
On March 31, 1950 the property of the Hindu undivided family
wu partitioned and the interest of the family in the partnership
wu taken over by a private limited company styled Sir Sarupchand Hukumchand Ltd.
For the assessment years 1950-51,
1951-52, 1952-53 and
1953-54 the Income-tax Officer grante<l. registration of the firm
Wider s. 26A of the Indian Income-tax Act, 1922. In. 1954-55
the InCom.e-tax Officer declined to grant registratl6n. In appeal
the Appellate Assistant Commissioner confirmed the order on the
ground that two coparceners could not represent the interest of the
Hindu undivided family in a partnership. The Tribunal reversed
the order. They held that.Sir Hukumchand and his son Rajkumar
Singh were partners in the firm on behalf of the Hindu undivided
family and there was nothing in law which prevented two or more
coparceners of a Hindu undivided family representing the family
from entering into a partnership with a stranger or strangers.
At the instance of the Commissioner of Income-tax the following question was referred by the Tribunal :
"Whether in the facts and circlllllStances of the case
the firm Hukumchand and Mannalal Company could be
granted registration under s. 26A of the Act ?"
The High Court answered the question in the affirmative. The
CommiSsioner of Income-tax has appealed to this Court with
certificate granted by the High Court.
[n Ram Laxman Sugar Mills v. Commissioner of Income-tax,
U.P. and Anr.(1) this Court observed:
"A Hindu undivided family is x x x x a "person"
within the meaning. of the Indian Income-tax Act : it is
however not a juristic person for al! purposes, and cannot enter into an agreement of partnership with either
(I) 66 I.T.R. 613.
648
SUPREME COURT REPORTS
[1971 J l S.C.R.
another updivided family or individual. It is open to
the manager of a joint Hindu family
as
representing
the family to agree to become a partner with another
persort. The partnership agreement in that case is between the manager and the other person, and by the partnership agreement no member of the family except the
manager acquires a right or interest in the partnership.
The junior members of the family may make a claim
against the manager for treating the income or profits
received from the partnership as a joint family asset,
but they cannot claim to exercise the rights of partners
nor be liable .as partners."
This position in law was not disputed on behalf of the Commissioner. But it was urged that smce two members of a coparcenary represented in the firm the same beneficial interest of u
Hindu undivided family, and since they were incompetent to
enter into a contract inter se, the partnership agreement could
not be. registw;d. There is no substance in that contention. In
P. K. P. S. Pichappa Chattiar & Ors. v. Chokalingam Pillai
& Ors.(') the Judicial Committee obsered, approving the obser·
vations made in Mayne's Hindu Law (9th Edn.) at p. 398 to the
following effect :
·
"Where a managing ' member of a joint family
enters into a partnership with a stranger the other members of the family do not ipso facto become partners in
the business so as to clothe them with all the rights and
obligations of a partner as defined by the Indian con·
tract Act, in such a case the family as a unit does not
become a partner, but only such of its members as in
fact enter into a contractual relation with the stranger :
the partnership will be governed by the Act."
It is clearly enunciated that one .or more members of a Hindu
undivided family may enter into a contractual relation in the
nature of a partnership with a stranger and they qua the stranger
become partners. The view expressed by the Judicial Committee
was approved by this Court in Charandas Haridas & Anr.
v.
Commissioner of lncome-tax, Bombay North. Kutch and Saurashtra, Ahmedabad & Anr. (2 ).
The Indian Contract Act imposes no disability upon members
of a Hindu undivided family in the matter of entering into a
contract inter se or with a stranger.
A member of a Hindu undivided family has the same liberty of contract as any other individual : it is restricted only in the manner and to the extent
provided by the Indian Contract Act. Partnership is under s. 4
(1) A.T.R. (1934) P.C. 192.
(2) 39 1.T.R. 202.
A
B
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D
F.
F
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A
B
c
L.l.T. I'. llUKUMCllAND (Shah, J.)
649
of the Partnership Act the relation between persons who have
agreed to share the profits of a business carried on by all or 1ny
of them acting for all : if such a relation exists, it will not be
invalid merely because two or more of the persons who have so
agreed are members of a Hindu undivided family.
It is now
settled law that in considering an application for registration of
a fim1, the Income-tax Officer is not concerned to determine in
whom the beneficial interest in the share in the partnership vests :
Comrrtissioner of /11comc-tax v. A. Abdul Rahim & Co. (1); Commissioner of Income-tax. Madras v. Bagyalakshmi & Co.<2).
h; our judgment, the High Court was right in answering the
question in the affirmative.
The appeal fails and is dismissed with costs.
R.K.P.S.
(I)
55 l.T.R. 051.
(2)
55 l.T.R. 660.
Appeal dismissed.