9911796707
TMI Blog1976 (8) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive assessee ?" The material facts are these: The assessees, Sahu Madho Prasad and Sahu Govind Prasad, are partners of a firm by name Arvind Cold Storage. The minor son of each of them had been admitted to the benefits of partnership in this firm. Each of them was the karta of his joint family and was a partner in the aforesaid firm on behalf of his joint family. The share of each of these partners in the said firm was assessed to tax in the hands of the respective joint family. In the assessment years 1967-68 to 1969-70, the share of each of the minors in the profits of the firm was treated as the income of his father in his (the father's) individual status and was assessed accordingly. Feeling aggrieved by the aforesaid inclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h such individual is a partner " occurring at the end of clause (ii), as it originally stood, have been deleted. After such amendment clause (iii) of section 64(1) reads : " (iii) to a minor child of such individual from the admission of the minor to the benefits of partnership in a firm." The learned Advocate-General and Shri Ashok Gupta, who appeared for the assessees, contended that the share of each of the minors who had been admitted to the benefits of partnership, in the income of the firm, could not be treated as the income of his father since the latter was a partner not in his individual status, but as the karta of his joint family. In other words, the contention was that it was only where the father of such minor was a partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dual or as karta of his joint family. According to the learned standing counsel, the object of the aforesaid amendment of section 64 was not to remove any ambiguity as to the above legal position but to widen the net of taxation by treating the income of a minor admitted to the benefits of partnership as the income of his father irrespective of the latter being or not being a partner of the firm in which his minor son was admitted to the benefits of partnership. The crux of the controversy between the parties centres on the interpretation of the words " in which such individual is a partner " occurring at the end of clause (ii) of the unamended section 64(1) of the Act. While according to learned counsel for the assessees those words mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he junior members become partners in the business. In short, the liability of the latter arises by reason of their status as coparceners and not by reason of any contract of partnership by them." In Commissioner of Income-tax v. Bagyalakshmi Co. [1965] 55 ITR 660, 664 (SC), Subba Rao J. (as he then was), who spoke for the court, reiterated the position of law thus : " 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the firm. But, qua other partners of the firm, he is a partner only in his individual capacity and the joint family, as such, does not become a partner nor will other members of the family become partners of that firm. From the aforesaid legal position it follows that the words " in which such individual is a partner " occurring at the end of clause (ii) of unamended section 64(1), merely indicate that in order to attract the liability under that clause the father of a minor admitted to the benefits of partnership, should be a partner of the firm, whether as individual or as karta of his joint family. Since the joint family, as such, cannot be a partner of a firm, and only an individual can be a partner of a firm, the word " indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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