COMMISSIONER OF INCOME-TAX VS RAGHUBIRDAYAL AGARWALLA
1998 P T D 1087
[221 I T R 433]
[Gauhati High Court (India)]
Before D. N. Baruah and. S. B. Roy, JJ
COMMISSIONER OF INCOME-TAX
Versus
RAGHUBIRDAYAL AGARWALLA
Income-tax Reference No.48 of 1990, decided on 03/06/1996.
Income-tax---
----Total income---Inclusions in total income ---Firm---Assessee partner in firm as Karta of H.U.F.---Share income of wife of asessee from the same firm is not includible in total income of assessee in his individual capacity-- Indian Income Tax Act, 1961, S. 64(1)(i).
Where an assessee is a partner in a partnership firm as Karta representing his Hindu undivided family, in which firm, his wife is also a partner, the provisions of section 64(1)(i) of the Income Tax Act, 1961, have no application for clubbing the share income of the wife from the said firm with the income of the assessee, in his individual capacity.
CIT v. Jhabarmal Agarwalla (1992) 195 ITR 351 (Gauhati) and CIT v. Shri Om Prakash (1996) 217 ITR 785 (SC) fol.
G.K. Joshi and U. Bhuyan for the Commissioner.
Nemo for the Assessee.
JUDGMENT
D.N. BARUAH, J.---In Civil Rule No.6(M) of 1985, this Court directed the Income-tax Appellate Tribunal, Guwahati, to refer the following question for opinion of this Court on the basis of an application filed by the Revenue under section 256(2) of the Income Tax Act, 1961 (for short, "the Act"):
"Whether, on the facts and in the circumstances of the case and on a proper construction of section 4 of the Indian Partnership Act, 1932, and sections 2(23) and 64 of the Income Tax Act, 1961, the Tribunal was justified in holding impliedly that when an individual is a partner in a partnership firm representing his Hindu undivided family in which firm, his wife is also a partner, the provisions of section 64(1)(i) do not apply for clubbing of the share of income of the wife from the said firm with the individual income of the assessee?"
Accordingly, the above question has been referred for opinion of this Court.
The facts for the purpose of answering this question may be stated as follows:
The assessee was a partner in a firm known as Anil Brothers, representing his Hindu undivided family. In the said firm, his wife was also a partner. The Income-tax Officer assessed the income of the assessee in his individual status under section 144 read with section 147 of the Act for the relevant assessment year. The share income of the assessee's wife from the firm was also included by the Assessing Officer under section 64(1) of the Act. The contention of the assessee was that the share income of the wife of the assessee from the firm in which the assessee was also a partner as Karta in his representative capacity should not be clubbed under section 64(1)(i) of the Act. The Income-tax Officer observed that the assessee's wife was also a partner in the firm. He, therefore, held that her share of the firm had to be included in the assessee's assessment in his individual capacity. On appeal before the Appellate Assistant Commissioner, he directed deletion of the wife's share income from the assessment of the assessee in his individual capacity for the assessment year in question. Being aggrieved, the Revenue approached the Tribunal by filing an appeal and the Tribunal rejected the appeal. Therefore, an application under section 256(1) of the Act was filed by the Revenue for referring the question, for opinion of this Court However, the Tribunal refused to make the reference holding that there was no referable question. Situated, thus, the Revenue filed an application in this Court under section 256(2) of the Act (Civil Rule No.6(M) of 1985). This Court disposed of the said civil rule giving a direction to the Tribunal to refer the said question. Hence the present reference.
We have been heard Mr. G.K. Joshi, learned standing counsel appearing on behalf of the Revenue. None appears on behalf of the assessee.
Mr. Joshi submits that this case is squarely covered by a decision of the apex Court in CIT v. Shri Om Prakash (1996) 217 ITR 785 (SC); (1995) Supp 4 SCC 737 and also a decision of this Court in CIT v. Jhabarmal Agarwalla (1992) 195 ITR 351; (1992) 1 GLR 169 (Gauhati). .
We have gone through the decisions. In CIT v. Shri Om Prakash (1996) 217 ITR 785, the apex Court held (page 798):
..We hold that where a person is a partner in a partnership firm not in his individual capacity but as the Karta of the Hindu undivided family, neither the income accruing to his wife on account of her being a partner in the same partnership firm nor the income accruing to his minor children on account of their being admitted to the benefits of such partnership firm, can be included in the total income of such person-neither in his individual assessment nor in the assessment of the Hindu undivided family. .
In our opinion, the question referred in this case is squarely covered by the above decisions. Accordingly, we answer the question in the affirmative, in favour of the assessee and against the Revenue. A copy of this judgment under the signature of the Registrar and the seal of the High Court shall be transmitted to the Income-tax Appellate Tribunal.
In the facts and circumstances of the case, there will be no direction as to costs.
A. A. / 1271 /FCReference answered.