Law:

Section:

Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] - HUF - Assessable as - Whether mere fact that income is entered in family accounts cannot lead to inference that income is joint family income - Held, yes - Whether in order to establish that income of Hindu coparcener from some partnership business is joint family income, department should produce material to show that Hindu coparcener was in fact representing HUF for share of partnership he was holding - Held, yes - Assessee HUF consisted of four brothers - All brothers entered into a partnership with two others - Tribunal added income of eldest brother to income of HUF on ground that his share of income was shown in joint family accounts - Whether that circumstance in itself was not sufficient to show that eldest brother was representing HUF in partnership - Held, yes - Whether in absence of any material to show that there was blending of income with joint family funds, income of eldest brother could not be taxed in hands of assessee HUF - Held, yes FACTS The assessee HUF consisted of four 'K' brothers. In the year 1942, the four brothers entered into a contract of partnership with two 'D' brothers. The deed of partnership provided that each of the four 'K' brothers would have two and a half annas share in the profits and losses of the partnership business. The two 'D' brothers were granted three annas share. The partnership lasted from June 1942 till March 1947. The accounts of the partnership showed that each of 'K' brothers and each of the 'D' brothers was credited with respective shares of the profit. The profits were credited to the personal account of the partners in the books of the partnership. An application for registration of the firm was made to the income-tax authorities under section 26A. The application was allowed and the firm was ordered to be registered for all the assessment years. In spite of this fact the ITO held that the income derived by the four 'K' brothers from the partnership was not individual income but should be treated as income of the HUF and taxed as such. The reason given by the ITO was that the four 'K' brothers were not…

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