COMMISSIONER OF INCOME TAX Vs. MULJI GORDHANDAS

JUDGEMENT

(1.) THE assessee Mulji Gordhandas, Morvi, was a partner in the firm Hansraj Keshavji of Morvi representing his HUF. The three minor sons of assessee, namely, Rajesh, Munesh and Suresh were admitted to benefit of partnership firm. Assessee had been assessed in respect of his share of profit from the firm in the status of HUF. He had not filed any return of his status as individual, as he has no taxable income. The ITO issued notice under S. 148 requiring the assessee to file a return in his individual capacity which was returned as nil. Applying S. 64, the shares allotted to minor sons of assessee, who were admitted to the benefit of partnership, in the firm in which he was also a partner representing HUF were assessed as income of assessee in his individual capacity. This order on appeal was not sustained by AAC holding that since S. 64 applies only in case of an individual and not in case of a person becoming partner in his status as Karta of HUF, exigency for operating of S. 64 in the present case did not arise. As assessee was a partner in the firm, representing his HUF and not in his individual capacity, it was not a case where income arose directly or indirectly to the spouse of an individual from the share in the firm as its partner or by admission of the minor to the benefits of partnership in a firm in which such individual was a partner. It was a case where income had arisen to minor children of a person who was partner in the firm representing his HUF and not in his individual capacity, the two being separate entities for the purpose of IT Act. In arriving at this decision, learned AAC has followed the decision of this Court in Dinubhai Ishvarlal Patel vs. K.D. Dixit, ITO & Ors. (1979) 118 ITR 122 (Guj) : TC 42R.595. The Tribunal affirmed the order of AAC. At the instance of Revenue on an application being made under S. 256(1), the Tribunal has referred following question of law arising out of its order in three ITA Nos. 984, 985 and 986 of 1982 relating to asst. yrs. 1971 72, 1972 73 and 1973 74:

(2.) THE issue is now concluded by decision of the Supreme Court in CIT vs. Om Prakash and Ors. (1996) 130 CTR (SC) 82 : (1996) 217 ITR 785 (SC) : TC 42R.596. The Court explained :