- (1.) THE Tribunal has referred the following question arising out of its order dt. 29th June, 1982, in respect of asst. yr. 1981-82 under s. 256(1) of the IT Act : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding in law that the agreement of partnership was valid and the proper status of the assessee should have been that of the firm and not of the HUF ?"
(2.) THE brief facts of the case are that there was an HUF consisting of Shri Mangilal (Karta), his wife and his son Shri Kailashchand. Prior to the assessment year in question, the HUF carried on the retail business. THE Karta and his son thereafter constituted a partnership firm during the year under appeal. THE return was filed showing the status as that of a firm. THE registration was also granted by the Registrar of firms. THE ITO while assessing the assessee determined the status of the assessee as HUF and observed that : "In the absence of any partition in the family and order under s. 171, the coparcerners of the HUF cannot form a separate registered firm and are not entitled to any benefits of registration." THE books of accounts were rejected and a gross profit of 14% was applied on the total sales of Rs. 1,90,000 against the gross profit of 10% on the sales of 1,85,746. THE AAC upheld the order of the ITO. In second appeal before the Tribunal it was observered that a coparcerner can become a partner with the Karta in a firm. This controversy was considered by this Court in the case of Gularaj Poonamchand vs. CIT (1984) 43 CTR (Raj) 244 : (1984) 148 ITR 326 (Raj) in which the dispute was with regard to Karta of HUF entering into a partnership with other member of the HUF and it was held by this Court that the firm was valid and is entitled to registration. Following the said decision, we are of the view that the Tribunal was justified in holding in law that the agreement of the partnership was valid and proper status of the assessee should have been that of the firm and not of HUF. The reference is answered in favour of the assessee against the Revenue. No order as to costs.;