Law:

Section:

Section 4 of the Income-tax Act, 1961 - Hindu undivided family - Assessable as - Assessment year 1972-73 - Whether individual share of a coparcener in a partnership firm, as a species of property, is quite amenable to being converted into joint family property by expression of unequivocal intention in that regard by coparcener concerned - Held, yes - Whether it is not necessary that joint family hotchpot should already hold something to enable a coparcener to throw his separate property into it - Held, yes - Whether bifurcation of capital account of coparcener in books of firm to throw his share in hotchpot of joint family is not necessary - Held, yes FACTS The assessee, an individual, was a partner in two partnership firms. On 20-10-1969, he executed a deed of declaration under which he impressed one-half of his partnership interest with the character of joint family property. He further declared that he would thenceforward hold one-half of his interest in the two firms only in his capacity as karta of his joint family. He then claimed before the ITO that the shares of profits from the two firms, must be taken to consist of two halves, one half alone to be included in his personal assessment, the other half to be considered in the hands of the joint family. The ITO rejected this claim on ground that assessee's deed of declaration had not been followed up by a bifurcation of assessee's capital accounts in two partnerships. The AAC agreed with the ITO. The Tribunal accepted the assessee's claim. On reference: HELD Just as the firm owns its assets, so does a partner own his interest in that partnership. The firm can deal with its assets, and any partner having the requisite authority can represent the firm and deal with the firm's assets. The interest of a partner is not a mere fraction of the net assets of the partnership, but altogether a different species of property in itself, so that the sum total of all the partner's interest does not make up the partnership property as such. Thus, the partner's interest is capable of being freely transferred just as any other species of property is transferable. There is no bar to the transfer, or assignment. A partner's…

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