1984 (9) TMI 16 - HC - Income Tax

Assessment, Firm, Firm Assessment, HUF, Inclusions In Total Income, Partial Partition In Larger HUF, Total Income

Summary

Issues:
1. Assessment of the assessee as Hindu undivided family or individual.
2. Inclusion of minor's income in the assessee's income under section 64 of the Income-tax Act, 1961.

Analysis:
The case involved determining whether the assessee should be treated as a Hindu undivided family or an individual for assessment purposes and whether the income of the minor sons should be included in the assessee's income under section 64 of the Income-tax Act, 1961. The High Court reviewed the facts and legal arguments presented before it.

The court found that a partition had occurred in the larger Hindu undivided family of P. L. Khedkar and N. P. Khedkar on March 22, 1968. The Income-tax Officer initially treated the assessee as an individual, but the Appellate Assistant Commissioner considered the assessee to be a Hindu undivided family based on the Supreme Court decision in N. V. Narendranath v. CWT [1969] 74 ITR 190 (SC). The Income-tax Appellate Tribunal also ruled in favor of the assessee, identifying the assessee as a Hindu undivided family with his two unmarried daughters and wife.

The court emphasized the importance of properly analyzing the partition deeds to determine the status of the assessee. The first partition deed indicated a partition of only the cloth business, while the larger Hindu undivided family still owned other properties. The second partition deed involved the division of an amount among the coparceners, maintaining the existence of the Hindu undivided family.

The court held that there was no full partition in the family of N. P. Khedkar, and the Hindu undivided family continued to exist. As a result, the income of the minor sons could not be included in the assessee's income. The court clarified that if the father was a partner in a firm as the karta of a Hindu undivided family, the wife's share as a partner could not be clubbed with the husband's income.

In conclusion, the court answered the questions posed by the Tribunal by stating that the assessee should be assessed as a Hindu undivided family due to the absence of a full partition. Additionally, the income of the minors could not be included in the assessee's income. The parties were directed to bear their own costs of the reference.