Can a HUF be a partner in a firm?


Can a HUF be a partner in a firm?

One or the most question is can a HUF be a partner in a firm?

It may be noted that Under section 2(31) of the Income-tax Act, 1961, a Hindu undivided family (HUF) is a ‘person’ for the purpose of the Income-tax Act.

However, a HUF is not a juristic person for all purposes u.e., not for the purposes of other laws including the partnership law.

In the Indian Partnership Act, 1932, supreme court has held that a HUF is not a juristic person and it cannot enter into a valid partnership with any other person- Agarwal & Co. v. CIT [1970] 77 ITR 10 (SC).

Though the HUF cannot as such enter into a contract of partnership with another person or persons, the karta of the HUF, may enter into partnership with outsiders on behalf and for the benefit of his joint family. If he does so

the other members of the HUF do not, vis-a-vis the outsiders, become partners in the firm. They cannot interfere in the management of the firm or claim any account of the partnership business or exercise any of the rights of a partner. For the outsiders, it is the karta who alone is and in law, recognised as the partner- CIT v. Seth Govindram Sugar Mills  [1965] 57 ITR 510 (SC).

The Supreme Court in the case of Rashik Lal & Co. v. CIT [1998] 229 ITR 458 (SC) clarifies the position of a Hindu undivided family in partnerships as under :


  1. The HUF, directly or indirectly, cannot become of a partner of a firm because the firm is an association of individuals.



  1. All the provisions regarding mutual rights and liabilities are only applicable to the partners who are members of the firm;



  1. The only right of HUF is possibly to call upon the nominee partner to render accounts for the profits that he has made from the partnership



  1. The HUF or its representative does not have any special status in the Indian Partnership Act, 1932.



  1. The HUF is not and cannot be a partner in a partnership firm as it is not being a ‘person’ who can enter into an agreement of partnership;


  1. The nominee partner of HUF does not act in a ‘representative capacity’ in the partnership. The nominee simply functions in his ‘personal capacity’ like any other partner.