Law:

Section:

Section 4 of the Income-tax Act, 1961 - Hindu undivided family - Assessability of Income - Assessee represented his HUF as member in partnership firm - on partition of HUF, investment and interest of HUF in partnership firm was equally divided between members of joint family and assessee continued to be member of partnership firm on behalf of other members of erstwhile HUF - whether share income of assessee in profits of partnership was subject to an overriding title in favour of other members of erstwhile HUF and as such could not be taxed in the hands of assessee - Held, on facts, yes FACTS The assessee was the karta of a HUF consisting of himself, his wife and two minor sons. He was a member of a partnership firm representing his HUF. On 1-1-1971, a partition took place in the HUF. According to the memorandum of partition, even after the partition the assessee was to continue to remain a partner in the partnership firm. The memorandum also provided that the investment and interest of the HUF in the partnership firm was equally divided between the members of the HUF. The partition was recognised by the ITO by an order under section 171 made on 13-3-1975. For the assessment year 1972-73, the assessee filed a return as an individual. The ITO took the view that the total income accruing to the assessee as a representative of all the four members would be taxed in the hands of an unregistered firm. In first appeal, the AAC did not accept this view and deleted the addition made by the ITO. On further appeal by the revenue, the Tribunal took the view that after the partition whatever was earned by the assessee was not earned for himself, but for and on behalf of the members of his erstwhile HUF, so that the income which came into the hands of the assessee did not really and in fact belong to the assessee and thus the provisions of section 64 were ruled out. The Tribunal also rejected the argument that the income from the partnership firm could be assessed on the footing that the members of the erstwhile HUF constituted an AOP or a BOI. On reference: HELD Where there is a partition between the members of a joint family and the erstwhile karta of the joint family…

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