Law:

Section:

Section 64(2)(b) of the Income-tax Act, 1961 - Transfer of assets - For benefit of spouse or minor child, etc. - Assessment year 1976-77 - Assessee was karta of his HUF consisting of himself, his wife and two minor sons - Assessee impressed his separate funds to extent of Rs. 31,226 with character of HUF funds - Later on assessee became a partner of a firm on behalf of HUF and amount of Rs. 31,226 was invested by HUF as its capital in firm - Whether profit and interest received by HUF from firm was liable to be included in individual assessment of assessee under section 64(2)(b) - Held, yes FACTS The assessee was the karta of his HUP consisting of himself, Ms wife and two minor sons. On 13-10-1970, the assessee impressed his separate funds to the extent of Rs. 31,226 with the character of a HUF funds. Later with effect from 13-10-1970, the assessee became a partner of a firm on behalf of the HUP and the entire amount of Rs. 31,226 was invested by the HUP as its capital in the firm. During the assessment year 1976-77, the HUP received a sum of Rs. 25,617 from the firm as its share of interest and profit. The assessee claimed that the amount of Rs. 25,167 received by the HUP from the firm was not liable to be included in his individual assessment. The lower authorities including the Tribunal disallowed the assessee's claim and the Tribunal held that the amount of Rs. 25,617 received by the HUP from the firm was liable to be included in the individual assessment of the assessee under section 64(2)(b), as this was a case of conversion of property of Rs. 31,226 into other property and was, thus, hit by the provisions of section 64(2)(b). On reference : HELD Section 64(2)( h) specifically enjoined that the income derived from the converted property or any part thereof should be deemed to arise to the individual and not to the HUF. In the instant case, the amount of Rs. 31,226 which belonged to the assessee was thrown into the common stock of the family by a positive declaration of the assessee. It was the converted property which fetched income during the previous year relevant to the assessment year 1976-77. The income derived from the converted property, therefore,…

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