Upgrad LLM

partnership and huf

practicing advocate


 Whether an HUF can become apartner of a firm?

 Held HUF is not a legal person for the purpose of the Partnership Act.  A HUF directly or indirectly cannot become a partner of a firm.  There is no way that a HUF can intrude into the relationship created by a contract between certain individual .  The HUF is not and cannot be a partner in a partnership firm.  If a claim is made by a person who is a partner in a partnerhsip firm as representing HUF or any other body of persons, in law it makes no difference.  In the assessment of the firm, such a partner cannot be heard to say that he has not received the remuneration as a partner of the firm but in a different capacity.  He may have to accout for the remuneration received as a  partner to third parties and in the case of a HUF to other members of the HUF.  But, that agreement does not bind the firm nor does it alter the position of the partners under the Partnership Act or the Income Tax Act.  He may have to hand over the money to some others.  That may be his position with it.  Once it has paid the commission/remuneration to one of its partners it cannot get any deduction in its assessment for that payment because sec.,40(b) of the act expressely probhibits such deduction.

KCCR 2012 PAGE No: 1632.




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