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TMI Blog1984 (9) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... as includible in the total income of the assessee under section 64(1) of the Income-tax Act, 1961 ? " The assessee was a partner during the assessment years 1968-69 to 1970-71 in a partnership firm called Importex International. The other partners were the assessee's wife and brother-in-law. The assessee was partner as karta of his HUF. The ITO included the share of profits derived by his wife from the firm in the total income of the assessee under the provisions of s. 64(1) of the Act. The assessee preferred appeals to the AAC. He dismissed them. The assessee went up before the Income-tax Appellate Tribunal. The Tribunal upheld the assessee's contention that his wife's share of profits from the firm could not be included in his total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or parent unless the Income-tax Officer is satisfied, after giving that spouse or parent an opportunity of being heard, that it is necessary so to do. It was contended by Mr. Dhanuka, learned counsel for the Revenue, that by reason of s. 64(1), the income derived by the assessee's wife from the firm was required to be added in computing the total income of the assessee. Mr. Dhanuka submitted that an HUF could not be a partner in a firm as such. When a karta entered into i contract of partnership on behalf of his HUF, the partnership was between the individuals who formed it; neither the HUF nor its members were partners. The karta was personally and individually a partner qua the other partners in the firm. He was only accountable to his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of the husband or whether the income of the husband from the partnership is to be added on to the total income of the wife. That indication is found in Explanation I to s. 64(1). It provides that, for the purposes of clause (i), the individual, in computing whose total income the income referred to in clause(i) is to be included, shall be the husband or the wife whose total income, excluding the income referred to in clause (i), is greater. It is, therefore, clear that s. 64(1)(i) and Explanation 1 to sub-s. (1) are integral parts of a scheme and must be read together. When so read, it is apparent that the requirement is that the " individual " must be a partner not in a representative but in a personal capacity. This is best ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... latter case, it was held that a contract of partnership had no concern with the obligation of the partners to others in respect of their shares of profit in the partnership. A partner could be a karta of a joint Hindu family in which case he occupied a dual position. Qua the partnership, he functioned in his personal capacity and qua the third parties in his representative capacity. From this legal position, it followed, according to the learned judges of the Allahabad High Court, that the words " in which such individual is a partner " occurring in s. 64(1) indicated that, in order to attract the liability under clause (ii), the father of a minor admitted to the benefits of a partnership should be partner of the firm, whether as an individ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Andhra Pradesh High Court held that the expression " individual " in s. 64(1) did not comprehend the karta of a joint family. Citing the Supreme Court judgment in Bagyalakshmi Co.'s case [1965] 55 ITR 660, the court observed that qua the partnership, a partner functioned in his individual capacity and qua the third parties in a representative capacity. Where person represented as a trustee or karta or benamidar, s. 64 could not be invoked. The Andhra Pradesh High Court was unable to share the view of the Allahabad High Court that the words " in which such individual is a partner " took in a karta or trustee or representative of a group of persons. The expression " individual ", in its view, only took in a person in his individual c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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