PREM KUMAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, who is a partner in the firm, Ayodhya Prasad Gopinath, filed a return showing an income of Rs. 17,951 being share income from that firm. He showed his status as that of a HUF consisting of himself and his wife. THE assessee had, before becoming a partner in the firm, separated from his father and brothers, who formed a HUF on 17th of October, 1962, and an amount of Rs. 3,216 was given to him as his share. This amount was invested by the assessee in the firm, Ayodhya Prasad Gopinath. At the time when he became a partner of this firm, he was unmarried but during the previous year relevant to the assessment year 1971-72, he married and it was for this reason that he claimed that the share income received from the firm should be taxed in the hands of the HUF consisting of himself and his wife. THE ITO, however, did not accept this plea and taxed him in the status of an individual as in the earlier assessment years. THE decision of the ITO was reversed by the AAC. An appeal filed by the department has, however, succeeded. THE Tribunal has now, at the instance of the assessee, referred the following question for the opinion of this court :

(2.) COUNSEL for the assessee urged that as the nucleus for the investment made by the assessee in the firm came from the assets of the HUF the amount received by the assessee was ancestral property in his hands and as such the income that accrued from the investment of this money in the firm had to be taxed in the hands of the assessee in the status of a HUF and not as an individual. In the alternative, it is also urged that in any event if the share income from the firm could be treated as the individual income of the assessee in the earlier assessment years, it had to be treated as the income of the HUF as from May 13, 1970, when the assessee married.

(3.) WE will begin by considering the decision of the Supreme Court in the case of Gowli Buddanna v. CIT [1966] 60 ITR 293 (SC). One of the questions that their Lordships had to consider in that case was as to whether it was necessary that there should be two male members in order to constitute a HUF. While considering this controversy their Lordships considered the difference between a Hindu coparcenary and a Hindu joint family and also categorised the persons who go to constitute a HUF. It was observed (pp. 295, 296) :