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Clubbing of share income under section 64(1)(i) of the Income-tax Act, 1961 for the assessment year 1977-78. Analysis: The appeal before the Appellate Tribunal ITAT Cochin concerned the clubbing of the share income of the husband of the assessee with her income under section 64(1)(i) of the Income-tax Act, 1961. The Commissioner (Appeals) had held that since the assessee was not a partner of the firm at the end of the previous year, section 64(1)(i) was not attracted, leading to the department appealing the decision. Further facts revealed during the appeal hearing showed that the firm's accounting period was from 1-6-1975 to 31-5-1976, with the assessee ceasing to be a partner on 1-1-1976. The accounts were closed on 31-5-1976, and the share income of the husband accrued on that date. The department argued that section 64(1)(i) applied regardless of the assessee's partnership status when the accounts closed. Contrary to the department's stance, the Tribunal referred to the Supreme Court's ruling that profits in a partnership accrue only when accounts are closed. Citing the case of Bhogilal Laherchand, the Tribunal emphasized that for section 64(1)(i) to apply, the assessee must have been a partner when the share income accrued to the spouse. The decision in Vinodkumar Ratilal v. CIT further supported this view, stating both spouses must be partners when the income accrues to one of them. Ultimately, the Tribunal allowed the appeal in part, ruling that the share income of the husband for the period when the assessee was a partner should be included in her income, but not for the period after she ceased to be a partner. This decision was based on the principle that income must accrue when the assessee is a partner for section 64(1)(i) to be applicable.
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