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Partnership act

Divyansh (Student CA Final ) (48 Points)

07 March 2014

can a partnership firm become a partner in any other partnership firm?

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Deepak Gupta (CA Student) (15922 Points)
Replied 07 March 2014

Originally posted by : Divyansh
	can a partnership firm become a partner in any other partnership firm?

-> Under section 4 of the Indian Partnership Act, 1932, one of the basic elements required for a partnership is that there must be an agreement entered into by two or more persons. In this context, the English as well as the Indian law clearly provide that a firm is not a legal entity. Further, the word ‘persons’, as contemplated in section 4 of the Indian Partnership Act, 1932 means only natural or artificial persons, i.e. legal persons.
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-> Legally speaking, a firm of partnership is not a legal person and therefore a firm cannot become a partner of another firm. A firm is not a person in the eyes of law and as such, it is not entitled to enter into partnership with any firm or individuals or a Hindu undivided family.

– Dulichand Laxmi Narain vs. CIT [1956] 29 ITR 535 (SC).

Divyansh (Student CA Final ) (48 Points)
Replied 07 March 2014

Thank you... And what about the private limited co? Can a co. Become partner

Deepak Gupta (CA Student) (15922 Points)
Replied 07 March 2014

A company or corporation can become a partner in a partnership firm. This is because a company or corporation is a legal person in the eyes of law.
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[Under section 11 of the Indian Contract Act, 1872, read with sections 2(e) and 3 of the Indian Partnership Act, 1932 only such persons as are competent to contract, are of sound mind, major and are not disqualified from contracting by any law in force would be entitled to become partner.]