1998 (1) TMI 21 - HC - Income Tax

Summary

Issues:
1. Assessment of salary income received by a partner in a firm.
2. Clubbing of share income of a partner's wife with the partner's salary income.
3. Interpretation of section 64(1)(i) of the Income-tax Act, 1961.

Detailed Analysis:
The judgment pertains to a tax case where the assessee, a partner in a firm, received a salary and his wife was also a partner in the same firm. The Income-tax Officer assessed the salary income of the assessee under "Income from other sources" and clubbed the share income of the assessee's wife under section 64(1)(i) of the Income-tax Act, 1961. The Appellate Assistant Commissioner held that the wife's share income should not be clubbed with the assessee's salary income. The Appellate Tribunal upheld this decision, leading to the Revenue seeking a statement of the case for consideration by the High Court.

The key issue revolved around the interpretation of section 64(1)(i) of the Income-tax Act. The court noted that the assessee was a partner representing the Hindu undivided family in the firm, and the share income was separately assessed in the hands of the family. The court emphasized that when a person is a partner in a firm as a karta of the Hindu undivided family, the share income of the spouse should not be clubbed with the individual assessment of the partner. Citing the Supreme Court decision in CIT v. Shri Om Prakash, the court clarified that income accruing to the spouse from the partnership firm should not be included in the total income of the partner in his individual capacity.

The court further highlighted that there had been no amendment in the law regarding the clubbing of spouse's income, unlike in the case of minor children's income. Relying on the precedent set by the Supreme Court, the court concluded that the decision in Shri Om Prakash's case applied to the present tax case. Accordingly, the court answered the question of law in favor of the assessee, ruling that the share income of the assessee's wife should not be clubbed with the partner's salary income. The judgment was delivered in favor of the assessee, with no costs imposed.