AIR 1998 SUPREME COURT 401 ::1997 AIR SCW 4389 ::1998 TAX. L. R. 76 ::1998 (2) SCC 49 ::(1998) 144 CurTaxRep 161 ::(1997) 7 Scale 568 ::1998 (86) CutLT 583 ::1998 (229) ITR 458 ::(1998) 96 Taxman 16 ::(1998) 142 Taxation 408 ::1997 (10) Supreme 436 ::(1997) 10 JT 1 (SC)

Supreme Court Of India

(From : Orissa)*

Hon'ble Judge(s): S. C. Sen, S. Saghir Ahmad , JJ

Firm - Commission paid to partner - Deductibility - Payment made to partner representing H. U. F. - Plea that H. U. F. was real partner and so payment made to person representing H. U. F. is deductible - Not tenable. Income-Tax Act (43 of 1961) , S.40(b), S.184— Partnership Act (9 of 1932) , S.4, S.13— It cannot be said that the amount of commission paid by the firm to a partner who has joined the firm in a representative capacity does not fall within the mischief of S. 40(b) and would, therefore, be deductible. A firm is a compendious way of describing the individuals constituting the firm. An HUF directly or indirectly cannot become a partner of a firm because the firm is an association of individuals. When Section 4 of the Partnership Act speaks of "persons" who had entered into partnership with one another, it could only be individuals and not a body of persons. A body of persons like a firm could not enter into partnership with other individuals. An HUF cannot be in a better position than a firm in the scheme of the Partnership Act. In law, an HUF can never be a partner of a partnership firm. Even if a person nominated by the HUF joins a partnership, the partnership will be between the nominated person and the other partners of the firm. Having regard to the definition of "partnership" and "partners" it is not possible to hold that an HUF being a fluctu....