JUDGMENT

OJHA, J.:- This appeal by special leave has been preferred against thejudgment dated 22nd July, 1975 of the Bombay High Court in I.T. Ref. No. 95 of 1965 made under Section 66(1) of the lodian Income-tax Act, 1922. The assessment year under reference was 1961-62. 68

2. Chandrakant Manilal Shah was the Karta of a Hindu undivided family (HUF) and the family was carrying on business of cloth. Naresh Chandrakant, one of the sons of Chandrakant Manilal Shah, joined the business on a monthly salary of Rs. 100/- since about April, 1959. It was asserted that with effect from I st November, 1959 the business had been converted into a partnership between Chandrakant Manilal Shah as Karta of HUF and Naresh Chandrakant. The deed of partnership executed in this behalf of 12th November, 1959 indicated that Naresh Chandrakant had been admitted as a working partner with effect from I st November, 1959 having 35 per cent. share in the profits and losses of the firm and the remaining 65 per cent. share was held by Chandrakant Manilal as the Karta of the HUF. An application was made for registration of the firm which was dismissed by the Income-tax Officer on the ground that there was no valid partnership. The view taken by the Income-tax Officer-was upheld in appeal by the Appellate Assistant Commissioner. On further appeal, the Income-tax Appellate Tribunal also came to the same conclusion that there was no valid partnership and the business consequently must be taken to continue in the hands of the joint family. However, at the instance of the assessee the following question was referred by the Tribunal to the High Court for its opinion:-

Whether on the facts and in the circumstances of the case, there was a valid partnership under Annexure A between Shri Chandrakant, as the Karta of the HUF and Shri Naresh, a member of the family?

3. The High Court by the judgment under appeal answered the aforesaid question in the negative, in favour of the Revenue and against the assessee. In doing so, it relied on an earlier decision of that Court in Shah Prabhudas Gulabchand v. Commr. of Income-tax, Bombay, (1970) 77 ITR 870. It is against this judgment that, the assessee has come up in appeal to this Court.

4. It has been urged by the learned counsel for the appellants that the mere fact that Naresh Chandrakant had neither separated from the HUF nor brought in any cash asset as his capital contribution to the partnership but was contributing only his skill and labour, could not in law detract from a valid partnership being created. Learned counsel for the respondent, on the other hand, contended that the view taken in this behalf by the Tribunal and the High Court was correct and was not only supported by the decision relied on by the High Court referred to above but also by another decision of the Gujarat High Court in Pitamberdas Bhikhabhai & Co. v. Commr. of Income-tax, Gujarat, (1964) 53 ITR 341.

5. Having heard learned counsel for the parties, we are inclined to agree with the submission made by learned counsel for the appellants. In our view, this contention derives full support from the view of the Judicial Committee of the Privy Council in Lachhman Das v. Commr. of Income-tax, Punjab, (1948) 16 ITR 35. There the question which fell for consideration was (para 2 of AIR).-

"Whether in the circumstances of this case, there could be a valid partnership between Lachhman Das as representing a Hindu undivided family on the one hand and Daulat Ram, a member of that undivided Hindu family in his individual capacity, on the other?"

6. In other words, the question was the same as the one arising in the present case but for the difference in the factual background that, whereas in the case before the Judicial Committee the member had brought in his separate capital, the member in the present case claims only to be a working partner. Does this difference in facts make a difference in principle? That is the question..

7. In Lachhman Das (AIR 1948 PC 8), it