Law: Income Tax Act, 1922

Section: 64(1)(i),(ii)

Income-tax----Total income---Inclusions---Income of wife or minor child in firm in which assessee is partner---Not to be included where assessee is partner in his capacity as Karta of Hindu undivided family---Indian Income Tax Act, 1961, S.64(1)(i), (ii) (Before amendment with effect from 1st April, 1976). The respondent (in CIT v. Harbhajan Lal) was a partner in a firm in his capacity as the Karta of a Hindu undivided family. His minor children were admitted to the benefits of partnership in that firm. During the accounting periods relevant to assessment years .1973-74 and 1974-75, income accrued to the minor children from their admission to the benefits of partnership in the firm and the question was whether the income accruing to the minors could be included in the total income of the respondent by resort to section 64(1)(ii) of the Income-tax Act, 1961 (as it stood prior to amendment with effect from 1st April, 1976). The Appellate Tribunal held that the income of the minors could not be included in the total income of the respondent. Both the Tribunal and the High Court rejected the Departments applications for a reference. On appeal to the Supreme Court: Held, dismissing the appeals, that the question sought to be raised by the Department was concluded against it by the decision of the Supreme Court in L. Hirday Narain v. ITO (1970) 78 ITR 26, wherein it was held that income accruing to the minor children of the assessee from their admission to the benefits of partnership in the firm in which the assessee was a partner not in his individual capacity but as the Karta of a Hindu undivided family could not be included in the total income of the assessee and section 16(3)(a)(ii) of the 1922 Act did not apply. Section 64(1)(ii) of the 1961 Act, prior to its amendment with effect from 1st April 1976, was in pari materia with section 16(3)(a)(ii) of the 1922 Act and there was no good and compelling reason to depart from the view taken therein. The respondent (in CIT v. Anand Sarup) was a partner in a firm in his capacity as the Karta of a Hindu undivided family and his wife was also a partner in. the firm. The question was whether for the assessment years…

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