TMI Blog1990 (8) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as Variety Plywood and Quality Plywood, Bombay, in his individual capacity On August 20, 1970, out of his separate and self-acquired funds, he impressed a sum of Rs. 30,000 with the character of his Hindu undivided family property. He retired from the two partnership firms with effect from October 1, 1970. On the same day, he entered into these partnerships again in his capacity as the karta of his Hindu undivided family. He contributed a sum of Rs. 15,000 in each of these partnerships out of the aforesaid sum of Rs. 30,000, as his share, on behalf of the Hindu undivided family, in the capital of the two firms. It has been throughout contended by the Department in the incometax proceedings pertaining to the assessee that the income, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g heard along with these references. Section 64(2), as it was applicable for the assessment years up to 1975-76, was as follows: "Section 64(2). Where, in the case of an individual being a member of a Hindu undivided family, any property having been the separate property of the individual has, at any time ... been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family ... then ... for the purpose of computation of the total income of the individual . . . (b) the income derived from the converted property or any part thereof, in so far as it is attributable to the interest of the individual in the property of the famil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arising to the minors by virtue of their admission to the benefits of partnership in the firm could be included in the total income of the assessee. The Supreme Court said that the connection between the gifts made by the assessee and the income of the minors from the firm was a re-mote one and the income arising to the three minor sons could not be considered as income arising directly or indirectly from the transfer of assets by the assessee to the minors. The operative words of section 16(3)(a)(iv) were "income as arising directly or indirectly". Section 64(2)(b) uses the words "the income derived from the converted property". The Supreme Court in the above case said that the connection between the income derived and the transferred ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he partnership. The same reasoning applies to the language used in section 64 (2) (b) of the Income-tax Act, 1961 also. In order that the income can be considered as being derived from the converted property, there should be nexus between the converted property and the income which is so derived. When such income has no direct or indirect nexus with the converted property, it cannot be said to be derived from the converted property. Our attention was also drawn to a decision of the Kerala High Court in CIT v. Cochin, Refineries Ltd. [1982] 135 ITR 278, where the court said that the words "derived from" in section 80J cannot have a wide import so as to include any income which can in some manner be attributed to the business. There must ..... X X X X Extracts X X X X X X X X Extracts X X X X
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