TMI Blog1979 (1) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... 1972-73. The details of the changes in the constitution of the firm are not material for the purposes of this judgment but no minor child of the petitioner has ever been admitted to the benefits of partnership in the firm of Rashmikant Co. and the wife of the petitioner has never been a partner in the said firm of Rashmikant Co. The firm of Rashmikant Co. has been treated as a registered firm and has been so assessed for the assessment years 1966-67 to 1973-74, both inclusive. The share of the petitioner in the said firm has been added to the income of the petitioner in the status of an individual by respondent No. 1 who is the ITO in charge of the assessment of the firm of Rashmikant Co. The order of assessment for the assessment year 1966-67 in the case of the petitioner in the status of an individual has been made on January 24, 1969, and similarly, for the subsequent assessment years, orders of assessment have been made against the petitioner in the status of an individual on different dates. Apart from the petitioner being a partner in his individual capacity in the firm of Rashmikant Co., the petitioner is shown as a partner in the firm of Messrs. Dinubhai Is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and/or his predecessors as a registered firm and the share in the income of the petitioner in the said firm was assessed by ITO in the relevant assessment year as the income of the HUF of the petitioner. Accordingly, the orders of assessment for the petitioners-HUF for 1966-67 had been passed on February 30, 1967, (sic) and the orders in the same terms for the assessment years 1970-71 to 1972-73 had been passed on different dates subsequently. It is the petitioner's case that in the firm of Dinubhai Ishwarlal Co. the petitioner was a partner in his capacity as the karta of the HUF and, therefore, the income-tax authorities were rightly assessing his share of income of the firm of Dinubhai Ishwarlal Co. as the income of the HUF and while assessing the income of the HUF, the share of profits of the minors was not being included in the income of the HUF. So far as the wife of the petitioner, Mradulaben, was concerned, for the assessment year 1971-72, the previous accounting year being S.Y. 2026, the ITO added in her income the share of profits of the minor, Rashmikant Dinubhai, in the firm of Dinubhai Ishvarlal Co. by resorting to s. 64(1)(ii) of the I.T. Act, 1961. Against this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ....." It may be noted that under s. 2(7) of the Act : " Assessee " means a person by whom any tax or any other sum of money is payable under this Act, and includes--....... (b) every person who is deemed to be an assessee under any provision of this Act ........" Under s. 2(31) : " ' person ' includes- (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. " It is clear that so far as the provisions of s. 64(1)(ii) as they stood at the relevant time were concerned, the question was of the income of an individual, in other words, the concept of an individual has been used, and in the context of s. 2(31) of the Act, an "individual " has a different connotation from an HUF and other categories which are included in the definition in s. 2(31). It may be pointed out that, under the Indian I.T. Act of 1922, prior to 1937, there was no provision similar to s. 64(1)(ii). It was only by the Amendment Act of 1937 that for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted for the purpose of assessment and the words ' such individual ' used in section 16(3)(a) have reference only to that individual. That individual must be an assessee and it is in the computation of his total income for the purpose of assessment that the income of the persons mentioned in clauses (a) and (b) have got to be included. Sub-clause (a) refers to two distinct sets of persons bearing a relationship with 'such individual', the assessee. One is a wife and the other is a minor child. The case of the wife is dealt with in sub-clauses (i) and (iii) and the case of a minor child is dealt with in sub-clauses (ii) and (iv). " It was further observed at page 625 : " The legislature, however, chose to adopt a peculiar mode of enactment either for the purpose of economy of words or structural beauty and mixed up both these sets of provisions into the enactment of clause (a) of section 16(3) of the Act as it stands at present. It rolled in both these sets of cases and used the words ' a wife ' or ' minor child ' of ' such individual ' raising thus the question of construction which has got to be determined by us. ' Such individual ', as is talked of in section 16(3)(a), may hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was the interpretation placed by majority of the judges should be placed on the words " such individual " while interpreting the words " such individual ". S. K. Das J. did not agree with this further restriction of the word " individual " but both the majority and minority view were that the word " individual " must refer to an assessee in his individual capacity. The majority view makes it clear that the words " such individual " occurring in s. 16(3)(a)(ii) of the 1922 Act refer only to a person who was capable of having a wife or who was capable of having a minor child. That was also the meaning which appealed to S. K. Das J. We are not concerned with the question of male or female of the species in the present case, but the meaning does become clear even in the context of s. 64(1), sub-cls. (i) and (ii), that the " individual " that is referred to in sub-s. (1) must be an assessee who is capable of having a spouse or who is capable of having a minor child. We are concerned with the fact that after the use of the word " spouse " inserted in the Act after Sodra Devi's case [1957] 32 ITR 615 (SC), it is clear that the individual is being assessed in his individual capacity s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned, but qua them, he is merely their representative. If he is a representative, he is not an individual person. It can be said that it is just by a chance that the karta was a person whose spouse is also a partner in the partnership firm in which he represents the HUF or the minor child of that karta who represents the HUF in the partnership happens to be admitted to the benefits of the partnership or the spouse happens to be a partner. In neither case, qua the wife or qua the minor child, is he any one else than a representative. It is clear that so far as the HUF is concerned, as was pointed out by the Supreme Court, if a trust is represented in the partnership or if there is a sub-partnership or even a benami partner in any one of these capacities, he is there in no capacity other than as a representative. And it is just by chance that he happens to be the very individual whose spouse is also a partner in the same firm or whose minor child has been admitted to the benefits of that partnership firm, but the word ' individual ' occurring in s. 64(1)(ii) must be given the meaning, as pointed out in Sodra Devi's case [1957] 32 ITR 615 (SC) to mean a person who is capable of havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm and his rights and obligations in regard to the other partners, he is a partner only as an individual though his joint family is entitled to get from him his share in the profits of the firm and the joint family is liable for his share of losses in the firm. But, qua other partners of the firm, he is a partner only in his individual capacity and the joint family, as such, does not become a partner nor will other members of the family become partners of that firm. From the aforesaid legal position it follows that the words 'in which such individual is a partner' occurring at the end of clause (ii) of the unamended section 64(1) merely indicate that in order to attract the liability under that clause the father of a minor admitted to the benefits of partnership, should be a partner of the firm, whether as individual or as karta of his joint family. " With great respect to the learned judges of the Allahabad High Court, we are unable to draw the conclusion which they have drawn from the observations of the Supreme Court in Bagyalakshmi's case [1965] 55 ITR 660. If the observations in Bagyalakshmi's case are read in the light of what has been stated in Sodra Devi's case [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Sodra Devi's case [1957] 32 ITR 615 and in Bagyalakshmi's case [1965] 55 ITR 660. One further point which lends support to our conclusion is that the Explanation to s. 64 points out (at page 316 of 11 3 ITR) : " For the purpose of clause (i), the individual in computing whose total income the income referred to in that clause is to be included, shall be the husband or wife whose total income (excluding the income referred to in that clause) is greater ; and, for the purpose of clause (ii), where both the parents are members of the firm in which the minor child is a partner, the income of the minor child from the partnership shall be included in the income of that parent whose total income (excluding the income referred to in that clause) is greater ; and where any such income is once included in the total income of either spouse or parent, any such income arising in any succeeding year shall not be included in the total income of the other spouse or parent unless the Income-tax Officer is satisfied, after giving that spouse or parent an opportunity of being heard, that it is necessary so to do. " In view of the Explanation, it is clear that an " individual " who is referr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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