C. S. P. SINGH, J.

( 1 ) THE assessee is a firm. The dispute relates to the assessment year 1973-74. Originally this firm consisted of Sri Mata Prasad and Sri Lakhan Lal. These persons were partners in the firm as karta of their HUFs, and had 50% share each. With effect from 1st April, 1972, Sri Pradeep kumar, a junior member of the family of Sri Mata Prasad; also joined the firm as a partner. This was done by executing a partnership deed on April 24, 1972. Sri Pradeep Kumar did not bring any capital of his own for investment in the firm. The deed recited that Mata Prasad and Lakhan lal shall continue to be partners on behalf of their respective HUFs having a share of 40% each, and Pradeep Kumar, who was being taken in as a working partner, was given 20% share. The reconstituted firm applied for registration under Section 185 of the Act. The ITO rejected the application following the decision of the Bombay High Court in the decision in Manilal dharamchand v. CIT [1970] 78 ITR 96. The assessee appealed, but the AAC held that Pradeep kumar could not become a partner in the firm in which his HUF was already a partner through its karta. In his view this would amount to an agreement of partnership by Pradeep Kumar with himself. The assessee appealed. The Tribunal held that Pradeep Kumar had been taken as a working partner, and as such the partnership was valid. It rejected the departments plea that there was no valid partnership as Pradeep Kumar had not contributed any cash or other assets of his own in the partnership property. In doing so it followed the decision of the Mysore High court in the case of I. P. Munavalli v. CIT [1969] 74 ITR 529.

( 2 ) NOW, partnership is the relation arising out of a contract between persons to share the profits of a business. Being a contract it must be founded on some consideration so that it should be binding. It is not necessary that the consideration should be cash or property in order that a binding contract comes into existence. It may take the shape of capital, but it may also take the shape of labour and skill. This view is amply borne out by the relevant provisions of the partnership Act, and the Contract Act. We may refer to them :

"partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. "

( 3 ) THUS, the foundation of a partnership is an agreement. Now, this agreement is a valid and enforceable one, and is a contract as defined by Section 10. For all agreements there has to be a proposal (Section 2 (a), Contract Act) and an acceptance (Section 2 (b) of the Contract Act), and consideration (see Section 25 of the Contract Act), for the reciprocal promises. Section 2 (d)defines " consideration ". It says :

"when, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise. "

( 4 ) NOW, as Section 2 (d) does not specifically say that consideration must take the form of money and property. It is thus not necessary that in order to constitute a partnership each partner must bring in some money or property. As observed by vice Chancellor Wigram in Dale v. Hamilton [1846] 5 Hare 369 at p. 393:

"if one man has skill and wants capital to make that skill available, and another has capital and wants skill, and the two agree that the one shall provide capital and the other skill, it is perfectly clear that there is a good consideration for the agreement on both sides, and it is impossible for the court to measure the quantum of value. The parties must decide that for themselves. "

( 5 ) IT is as such not necessary that before a partnership comes into existence each partner must contribute capital in the firm. It is sufficient that the consideration, for the partnership contract is skill and the labour which a working part

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