TMI Blog1994 (12) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... Pune, is not includible under section 64(1)(i) of the Act, in the assessment of the assessee ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the Commissioner's order under section 263 of the Act ? " This reference relates to the assessment year 1975-76. The assessee was a partner in the firm of Messrs. Ashit Construction in his representative capacity as karta of his Hindu undivided family. Smt. L. V. Sanghavi, the wife of the assessee, was also a partner in the said firm in her individual capacity. In the assessment of the income of the assessee for the assessment year 1975-76, the Income-tax Officer did not include the share of the said Smt. L. V. Sanghavi in the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , reads as follows : " 64. (1) In computing the total income of any individual, there shall be included all such income as arises directly or indirectly-- (i) to the spouse of such individual from the membership of the spouse in a firm carrying on a business in which such individual is a partner ; (ii) to a minor child of such individual from the admission of the minor to the benefits of partnership in a firm in which such individual is a partner ; (iii) subject to the provisions of clause (i) of section 27, to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to live apart ; (iv) subject to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The aforesaid sub-section (1) was substituted by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. Since the assessment in the instant case pertains to the assessment year prior to the coming into force of the substituted sub-section (1), it is not necessary to refer to the same. As per section 64(1)(i) above, in computing the total income of any individual, there could be included all such income as arose directly or indirectly to the spouse of such individual from the membership of the spouse in a firm carrying on a business in which such individual was a partner. (emphasis supplied). The sub-section applied only to the computation of " the total income of any individual ". Therefore, unless an individual was a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ership. It regulates the rights and liabilities of the partners. As held by the Supreme Court in CIT v. Bagyalakshmi and Co. [1965] 55 ITR 660, a partner may be the karta of a joint Hindu family ; he may be a trustee ; he may enter into a subpartnership with others ; he may, under an agreement, express or implied, be the representative of a group of persons ; he may be a benamidar for another. In all such cases he occupies a dual position. Qua the partnership, he functions in his personal capacity ; qua the third parties, in his representative capacity. Thus, the dual position of a partner " qua the partnership " and " qua the third parties " has been clearly recognised. Hence, an individual, who is a partner in a representative capacity as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of CIT v. Jhabarmal Agrawalla [1990] 184 ITR 431 of which one of us (Dr. B. P. Saraf J.) was a member. The facts in that case have been similar to the facts in the case before us. In that case also the assessee was a partner in a representative capacity as karta of his Hindu undivided family and his wife was also a partner in her individual capacity. After considering various judgments cited including that of the Supreme Court in the case of Bagyalakshmi and Co. [1965] 55 ITR 660, the Division Bench aptly analysed section 64 of the Act and has held that in a case where the karta of a Hindu undivided family is a partner in his representative capacity, the income does not arise to him. The income arises to the Hindu undivided famil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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