1988 (11) TMI 83 - HC - Income Tax

Summary

Issues:
1. Interpretation of provisions of section 64 read with section 183(b) of the Income-tax Act, 1961 regarding partial partition of a Hindu undivided family.
2. Determination of whether a sub-partnership was created on partial partition and if the share income of the wife and minor son should be included in the income of the assessee under section 64 of the Income-tax Act, 1961.

Analysis:
The judgment pertains to an assessee, acting as karta of a Hindu undivided family, who was a partner in two firms. A partial partition of the Hindu undivided family was effected, dividing the shares in the two firms equally between the assessee, his wife, and minor son. The Income-tax Officer included the share income of the wife and minor son in the assessee's income from the firms under section 64 of the Income-tax Act, 1961, citing the creation of a sub-partnership. However, the Appellate Assistant Commissioner and the Tribunal found that an overriding obligation was created on the assessee to account for the profits to his wife and son, leading to relief for the assessee.

The main issue before the court was to determine whether a sub-partnership was created on the partial partition and if the share income of the wife and son should be included in the assessee's income. The court analyzed relevant provisions of the Income-tax Act, along with precedents like CIT v. Mahendrasingh Mohansingh, CIT v. Ram Narain, and CIT v. Pabbati Shankaraiah. The court distinguished the cited cases and found the present case closer to Pabbati Shankaraiah's case, where an overriding obligation was held to create a superior right in favor of the wife and son, making their shares not assessable in the hands of the father who was the karta.

Ultimately, the court held that no sub-partnership was created on the partial partition, and the shares of the wife and son were rightly not included in the income of the assessee under section 64 of the Income-tax Act, 1961. The court ruled in favor of the assessee, answering both questions in the affirmative and awarding costs to the assessee.