Law:

Section:

Section 64(1)(ii) of the Income-tax Act, 1961 [prior to its amendment by the taxation laws (amendment) act, 1975] - Transfer of assets - For benefit of spouse, minor child, etc. - Whether, where karta of HUF was partner in firm representing HUF, and his minor sons were admitted to benefits of partnership in that firm, share income of minors was includible in total income of karta as individual - Held, yes Facts The assessee, karta of a HUF, was a partner in a firm representing the HUF. His minor sons were admitted to the benefits of partnership in that firm. For the assessment year 1972-73, the share income of the minor sons were assessed by the ITO in the hands of the karta as an individual and this was sustained by the Tribunal. On reference, the assessee relied on the decision of the Andhra Pradesh High Court in CIT v. Sanka Sankaraiah [1978]113 ITR 313 , special leave petition against which was dismissed by the Supreme Court. Held A partner, being an individual, has dual capacities - Representative and personal. He may be a representative, i.e., a karta qua others, i.e.. othen than partners. But with his partners he functions in his personal capacity. The relationship between the partner-karta and the other partners is personal. He does not act with the other partners in his representative capacity. This position does not, and cannot change when the other partner is related to him as his wife or minor children. Section 64, at the material time, required an individual and his wife and/or minor children to be partners of each other. That is enough. Their other relationships inter se are not relevant. The fact that he is also the karta, guardian or trustee or benamidar, etc., is immaterial. The phrase 'in which such individual is a partner' occurring in section 64 includes a human being who may be the karta of a HUF. Further, when a karta becomes a partner with strangers, the junior members of the HUF do not ipso factobecome partners. The minor children of the individual may be members of his HUF but as members they cannot be partners in the firm. Hence, the karta partner, who is an individual, cannot be treated to function as a representative of the wife or…

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