COMMISSIONER OF INCOME TAX Vs. THAKKAR S K

JUDGEMENT

(1.) A point of some interest arises in this reference at the instance of the Revenue under S. 256(1) of the IT. Act, 1961. There has been a difference of opinion among some High Courts about it. The question that we are required to answer indicates the point: "Whether, on the facts and in the circumstances of the case, the share of profit received by the assessee's wife from the firm of Importex International was includible in the total income of the assessee under S. 64(1) of the IT Act, 1961 ?"

(2.) THE assessee was a partner during the asst. yrs. 1968 69 to 1970 71 in a partnership firm called Importex International. The other partners were the assessee's wife and brother in law. The assessee was partner as Karta of his HUF. The ITO included the share of profits derived by his wife from the firm in the total income of the assessee under the provisions of S. 64(1) of the Act. The assessee preferred appeals to the AAC. He dismissed them. The assessee went up before the Tribunal. The Tribunal upheld the assessee's contention that his wife's share of profits from the firm could not be included in his total income. It held that S. 64(1) had no application to the case. Sec. 64(1), in its opinion, concerned itself with the assessment of an individual. What was needed to be considered was whether the individual was a partner in his individual capacity or in his capacity as a Karta. Sec. 64(1) applied only to an assessee who was a partner in an individual capacity.

(3.) (i) to the spouse of such individual from the membership of the spouse in a firm carrying on a business in which such individual is a partner ; ...