(Civil Appeals Nos.861 and 862 of 1984 (CIT v. Harbhajan Lal) are by special leave against the judgment and order dated 29th April, 1981 of the, Punjab and Haryana High Court in ITC No.56 of 1980).

(Civil Appeals Nos.5851 to 5853 of 1983 (CIT v. Anan Sarup) are by Special leave from the judgment and order dated 17th September, 1979 of the Punjab and Haryana High Court in ITR Nos. 91 of 1977 and 17 of 1978. The judgment of the High Court is reported as CIT v. Anand Sarup (1980) 121 ITR 873 (P&H)).

(Civil Appeals Nos.2989 of, 1983 (CIT v. Shantilal Mohanlal) is by special leave from the order, dated January 24, 1979, of the Gujarat High Court in ITC No.169 of 1978).

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 Department's 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 1972-73 and 1973-74, the share of the respondent's wife in the income of the firm could be included in the total income of the respondent. The High Court held that the share income of the wife could not be included in the total income of the respondent: See (1980) 121 ITR 873. The Department took the matter in appeal to the Supreme Court and the Supreme Court dismissed the appeals.

Decision of the Punjab and Haryana High Court in CIT v. Anand Sarup (1980) 121 ITR 873 affirmed.

CIT v. Sanka Sankaraiah (1978) 113 ITR 313 (AP) and Hirday Narain (L.) v. ITO (1970) 78 ITR 26 (SC) ref.

K.N. Shukla, Senior Advocate (W.C. Chopra and D.S. Mehra, Advocates with him) for Appellant (in all the appeals).

U.A. Rana, Anand Prasad and Rajiv Tyagi, Advocates for Respondent (in Civil Appeals Nos.861 and 862 of 1,984).

S.K. Bagga, Senior Advocate (Muni Lal Varma, Mrs. Sureshta Bagga and Seeraj Bagga, Advocates, with him) for Respondent (in Civil Appeals Nos.5851 to 5853 of 1983).

ORDER

Civil Appeals Nos.861 and 862 of 1984:

B.P. JEEVAN REDDY, J.---These appeals arise from the judgment of the Punjab and Haryana High Court dismissing an application under section 256(2) of the Income Tax Act, 1961. The assessment years concerned are 1973-74 and 1974-75. The question which the Revenue sought to raise reads thus:--

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the income of the minor children of the assessee in the firm, Messrs Harbhagwan Harbhajan Lal (Viramgeron) Chandigarh, was not includible in his individual capacity under section 64(1)(ii) of the Income-tax Act, 1961?"

(Question quoted from the paper book).

The assessee, Harbhajan Lai, was a partner in a partnership firm, during the relevant accounting years, in his capacity as Karta of a Hindu undivided family. His minor children were admitted to the benefits of that partnership-firm. The Income-tax Officer sought to include the income accruing to the said minors in the income of the assessee, which was objected to by him. The Tribunal agreed with him, whereupon the Revenue applied for referring the above question under section 256(1). It was rejected by the Tribunal. The Revenue then approached the High Court under section 256(2). The High, Court refused its request. The High Court was of the opinion that inasmuch as against the decision of the Andhra Pradesh High Court in CIT v. Sanka Sankaraiah (1978) 113 ITR 313, taking a view similar to the one taken by the Tribunal, this Court has rejected the special leave petition, and also because the Punjab and Haryana High Court itself has taken a similar view in another matter, there was no occasion or necessity to refer the said question.

We find that the question sought to be raised by the Revenue is concluded against it by the decision of this Court in L. Hirday Narain v. ITO (1970) 78 ITR 26 rendered with reference to section 16(3)(a)(ii) of the Indian Income-tax Act, 1922, which is in pari materia with section 64(l)(ii) of the Income Tax Act, 1961 (as it obtained prior to the amendment in 1975, with effect from 1st April, 1976) Shah, J. speaking for the Division Bench, observed (at page 29):--

"Income for the period 19th November, 1949 to 30th September, 1950 being assessed to tax as the income of a Hindu undivided family and not of an individual, section 16(3)(a)(ii) plainly did not apply and the income of the minor children of Hirday Narain could not be included in the income of Hirday Narain assessed as a Hindu undivided family."

It was also a case where the income accruing to the minors from their admission to the benefits of a partnership-firm was sought to be included in the income of the father who was a member of the partnership-firm--not in his individual capacity but as the Karta of the Hindu undivided family. It was held that the same could not be done. In view of the said decision and also because the law has been altered since 1st April, 1976, we do not think it advisable to examine the question on merits, though we are aware that there is a conflict of opinion among the High Courts on this question. We are also not satisfied that there are good and compelling reasons to depart from the view taken in Hirday Narain (1970) 78 ITR 26 (SC). The appeals accordingly fail and are dismissed. No order as to costs.

Civil Appeal No.2989 of 1983:

It is conceded that this appeal has to be dismissed following our decision in Civil Appeals Nos.861-62 of 1984. Though this case arises under section 64(1)(i), the principle of our decision in Civil Appeals Nos.861-62 of 1984 rendered with reference to section 64(1)(ii) applies equally here. The appeal is accordingly dismissed. No costs.

Civil Appeals Nos.5984-89 of 1983:

This appeal arises under section 64(1)(ii). The assessment years concerned are 1965-66 to 1967-68. It is found by the Tribunal as a fact that the father was a partner in the partnership-firm in his capacity as the Karta of the Hindu undivided family. Once this is so, the income of the minors arising from their admission to the benefits of the partnership-firm could not have been included in the father's income, as held by us in Civil Appeals Nos.861-62 of 1984. These appeals accordingly fail and are dismissed. No costs.

Civil Appeal No. 148 of 1993:

List this appeal on 21st September, 1993, for orders.

Civil Anneals Nos.5851-53 of 1983:

This is a matter arising with reference to section 64(l)(i) before it was amended in the year 1975. The assessment years concerned are 1973-74 and 1975-76. It is found by the Tribunal that the husband was the partner in the partnership-firm in his capacity as the Karta of Hindu undivided family. Following the principle of our decision in Civil Appeals Nos.861-62 of 1984, these appeals too fail and are dismissed. No costs.?

M.B.A./241/T.F. ???????????????????????????????????????????????????????????????????????????????? Appeals dismissed.