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TMI Blog1979 (9) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the share income of the assessee's wife from the firm, M/s. Vinod Trading Co., could not be clubbed with his income under section 64(1)(i) of the Income-tax Act, 1961 ? " Briefly stated the facts are that Shri Anand Sarup was assessed in the status of an individual prior to the assessment year 1970-71. The assessee was a partner in the firm, M/s. Vinod Trading Co., Ludhiana. During the assessment year 1970-71, the assessee, vide declaration dated 10th September, 1969, had impressed all his capital in the aforesaid firm together with all rights, title and interest in the aforesaid firm, with the character of a HUF, consist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a partner of the firm, M/s. Vinod Trading Co., and, therefore, any income accruing to his wife from the said firm cannot be assessed in his hands. We agree with the contention of the assessee. It is clear from clause (i) of section 64, sub-section (1), that both the individual as well as the spouse, whose income is to be clubbed with the individual's income, should be the partners of the firm. The assessee ceased to be the partner of M/s. Vinod Trading Co. after he impressed his entire capital and other interest in the said firm with the character of HUF during the assessment year 1970-71. This fact has been accepted by the AAC, inasmuch as he deleted the share income which was considered to be the income of the assessee by the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhra Pradesh High Court in CIT v. Sanka Sankaraiah [1978] 113 ITR 313 and that of the Gujarat High Court in Dinubhai Ishwarlal Patel v. K. D. Dixit, ITO [1979] 118 ITR 122. After hearing the learned counsel for the parties and considering the various contentions raised by the learned counsel for the revenue, we agree with the view taken by the Gujarat High Court in Dinubhai's case [1979] 118 ITR 122 and the Andhra Pradesh High Court in Sanka Sankaraiah's case [1978] 113 ITR 313. In Firm Bhagat Ram Mohanlal's case [1956] 29 ITR 521 (SC), what was stated by the Supreme Court is this : " It is well settled that when the karta of a joint Hindu family enters into a partnership with strangers, the members of the family do not ipso facto become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceed against the property of the junior members of the HUF. Similarly, in Bagyalakshmi's case [1965] 55 ITR 660 (SC), the position of law was enunciated as under : " A partnership is a creature of contract; under Hindu law a joint family is one of status and right to partition is one of its incidents. The income-tax law gives the Income-tax Officer a power to assess the income of a person in the manner provided by the Act. Except where there is a specific provision of the Income-tax Act which derogates from any other statutory law or personal law, the provision will have to be considered in the light of the relevant branches of law. A contract of partnership has no concern with the obligation of the partner to others in respect of their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the view taken by the Allahabad High Court. It is well known that what is being taxed under the I.T. Act is the income of a person, which includes an individual, a HUF, a company, a firm and an association of persons or a body of individuals, whether incorporated or not, a local authority and other artificial juristic persons not falling within the preceding categories. Section 64 of the Income-tax Act, 1961 (hereinafter called " the Act "), provides that in computing the total income of any individual, there shall be included all such income as arises directly or indirectly---(i) to the spouse of such individual from the membership of the spouse in a firm carrying on a business in which such individual is a partner; (ii) to a minor c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as a benamidar, section 64, in our view, cannot be invoked. If we are to agree with the learned counsel for the revenue that section 64 applies to a karta or a trustee, then it would lead to certain absurd situations. Take for instance the case of a trustee as a partner in a firm. If the trustee's spouse or a minor child are to be a partner of that firm, the income realised by the spouse or the minor child in that firm will have to be added to the income of the trustee earned from sources other than partnership in his individual capacity ...... We are unable to share the view of the Allahabad High Court that the words ' in which such individual is a partner ' take in a karta or trustee or representative of a group of persons. The expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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