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Partnership

Abhishek5g (CA) (167 Points)

01 May 2018

can a HUF be partner of the firm??

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Deepika Yadav (561 Points)
Replied 01 May 2018

A Karta of the Hindu undivided family can become a partner in a partnership in his individual capacity, provided the member has contributed his self acquired or personal skill and labor.

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Abhishek5g (CA) (167 Points)
Replied 01 May 2018

obviously he can... bt why not HUF? HUF is considered as a separate assessee..any supporting behind dis?

mohit pathak (Learner) (396 Points)
Replied 01 May 2018

NO, HUF cannot enter into a partnership agreement.

The Hon’ble Supreme Court in Ram Laxman Sugar Mills vs. CIT [1967] 66 ITR 613 observed that a HUF is undoubtedly a “Person” within the meaning of section 2(31), it is however not a juristic person for all purposes and cannot enter in to an agreement of partnership either with another HUF 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 person.

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Deepika Yadav (561 Points)
Replied 01 May 2018

Since, HUF is not a "person", but only group of persons belonging to the same family and carrying on the family business, HUF cannot be a partner in a partnership firm.

The Supreme Court of India held (AIR-1930-PC-300 & AIR1956-SC-854) - HUF is an association of persons is "not a person" within the meaning of expression in the Partnership Act. "… it is now well settled that HUF cannot enter into contract of partnership with another person or persons."

The Supreme Court of India, in another case M/s Rasiklal & Co Vs Commissioner of held that "…………. an HUF directly or indirectly cannot become a partner of a firm because the firm is an association of individuals." "…….in law, an HUF can never be a partner of partnership firm."

Though under the Income Tax Act, a person includes a HUF also, the Supreme Court in the case of Dulichand Laxminarayanan vs. Commissioner of Income Tax (AIR 1956 SC 354) has clearly held that the said definition cannot be imported to Section 4 of the Partnership Act and a firm cannot enter into partnership with a HUF.

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