LexCOMMISSIONER OF INCOME TAX, LUDHIANA versus OM PRAKASH
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COMMISSIONER OF INCOME TAX, LUDHIANA
v.
OM PRAKASH
JULY 27, 1999
[S.P BHARUCHA, B.N. KIRPAL, S. RAJENDRA BABU,
S.S.M. QUADRI AND M.B. SHAH, JJ.]
Income Tax Act, 1961:
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1 Income tax S.64(/)(i) and (ii) (as it stood prior to 1-4-1976)- clubbing
of income- Applicability of-To Karta of HUF-Assessee was a partner in a
partnership firm in his capacity as Karta of HUF-Minor children of the said
assessee admitted to benefits of partnership-Held: The expression
"individual" occurring in S.64(i)and(ii) does not include Kar!a of HUF-
Hence, the income arising to spouse or minor child of Karta of HUF cannot
D be included in the computation of his total income-Income of such Karla
-~s income of the HUF and not his individual income-Income Tax Act, 1922,
S.16(3)(a)(i) and (ii) (as inserted in 1937).
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Income Tax S.64(1) (as it stood prior to 1-4-1976)-0bject of-Held:
Object is, like S. I 6{3)!!/_ !T Act, I 922, it is to prevent evasion of tax by an ·
E individual doing business under a partnership with his wife/minor children.
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Income tax-S.64(1) (as it stood prior to 1-4-1976)-Expressions
"individual" and "such individual" occurring in S.64(i) and (ii) cover both
male.and female, unlike S.16(3) of IT Act, 1922.
Hindu Law:
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Joint family-HUF-Karta-partner in a partnership firm-And also
an assessee under Income Tax Act-Status of-Explained.
Words and Phrases:
"lndividual"-Meaning of-Jn the context of S.64(/)(i) of the Income
Tax Act,1961
"Such individual"-Meaning of-In the context ofS.64(ii) of the Income
Tax Act, 1961.
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C.l.T. v. OM PRAKASH
1187
"Assessee"-Meaning of-In the context of S.2 (7) of the Income Tax A
Act, 1961.
"Person"-Meaning of-In the context of S.2(31) of the Income Tax
Act, 1961.
The respondent-assessee was partner in a partnership firm in his B
capacity as Karta of the Hindu Undivided Family. Two minor children of the
respondent were admitted to the benefits of the partnership. They were also
partners in another partnership firm. The Income Tax Officer (ITO) included
the income arising in the hands of the minor children in the respondent's
total income for the assessment year 1973-74 under Section 64(1) (i) and
(ii) of the Income Tax Act, 1961. The Appellate Assistant Commissioner C
upheld the order of the ITO. However, the Income Tax Appellate Tribunal set
aside the order of the Appellate Authority. But the High Court allowed the
respondent's appeal. Being aggrieved the appellant-Revenue preferred the
present appeal.
Initially a two-Judge Bench of this Court upheld the judgment of the
High Court. But, on review, that judgment was set aside. However, in the
meanwhile, a three-Judge Bench of this Court approved it in CIT v. S.S.
Krishnamoorty, (TRC Nos.6 to 10 of 1982). Thereafter, when this case came
up before a three-Judge Bench, that Bench referred this case to a larger
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Be~
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Dismissing the appeal, this Court
HELD : 1. The precursor of Section 64(1) of the Income Tax Act, 1961
was Section 64(3)(a) (i) and (ii) of the Income Tax, Act 1922 (as inserted in
1937) which was enacted to prevent evasion of tax by an individual doing F
business under a partnership entered with his wife and/or minor children.
The said provision of the 1922 Act is embodied in Section 64(1) of the 1961
Act with the changes that the word 'wife' is replaced by the word 'spouse'
in Section 64(l)(i) and the Explanation is added thereto. Now, both the male
and the female are covered by the expressions 'any individual' and 'such G
individual' in Section 64(l)(i) and(ii) of the 1961 Act. (1193-C]
Balaji v. ITO (1961) 43 ITR 393 and CITv. Sodra Devi, (1957)32 ITR
615, referred to.
2.1. When a Karta of the Hindu Undivided Family is a partner in a lf
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SUPREME COURT REPORTS
[i 999] 3 S.C.R.
A partnership firm, he has dual capacity; qua the partnership, he fun.ctions in
his personal capacity and qua third parties, in his representative capacity.
Under the Income Tax Act, when he is· assessed in respect of the income
derived by him from the partnership firm as a partner, it is in his
representative capacity as .Karta of the Hindu Undivided Family and not as
. an individual as such. Therefore, the income of a Karta's spouse/minor child
B cannot be included in computation of his total income for that is the income
of the Hindu Undivided Family and not bis individual income. Section 64 of
the 1961 Act will be attracted only when an assessee's own inExcerpt shown. Read the full judgment & AI analysis in Lexace.