An HUF falls under the definition of “Person” as per the income tax act. However, for the purpose of Partnership Act, HUF cannot be treated as a partner since a Partnership Firm is an Association of Individuals.
Further, there are various case laws to advocate the same whereby it has been held that an HUF cannot be a partner but the manager or karta acting on behalf of HUF is competent to enter into a valid partnership with a stranger in individual capacity. In such a case, the partnership will be between the nominated person and the other partners of the firm. The members of the family may make a claim against the manager for treating the income or profits received from the partnership as a joint family asset, BUT they cannot claim to exercise the rights of partners nor be liable as partners.
The above inference has been drawn from the following Cases:
- Coal India Ltd. Vs Continental & Eastern Agencies
- Rashiklal & Co
- Ram Laxman Sugar Mills
Hence, an HUF is not eligible to be a partner in a firm. Irrespective of the relationship between the HUF and its nominee partner, neither the HUF nor any other member thereof can claim to be a partner or connected with the partnership through a nominee.
