HUF taxation rule: higher rate depends on an individual member's income, not a smaller HUF formed on partition.

The higher rate under the relevant finance provision applies only by reference to the total income of an individual member of the Hindu undivided family. Income belonging to a smaller Hindu undivided family formed on partition cannot be substituted for the income of an individual member of the bigger family. Where no individual member of the assessee-HUF exceeds the prescribed limit, the higher rate for a specified HUF does not apply.

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Issues: Whether a Hindu undivided family was liable to be assessed at the higher rate applicable to a specified Hindu undivided family when the income exceeding the prescribed limit belonged to a smaller Hindu undivided family and not to any individual member of the bigger Hindu undivided family.

Analysis: Under sub-paragraph II of paragraph A of the First Schedule of the Finance (Amendment) Act, 1975, the relevant criterion is the total income of an individual member of the Hindu undivided family. The statutory language does not permit the income of a smaller Hindu undivided family formed on partition to be substituted for the income of an individual member of the bigger Hindu undivided family. Since no individual member of the assessee-HUF had income exceeding the prescribed limit, the higher rate could not be applied.

Conclusion: The assessee-HUF was not liable to be assessed at the higher rate applicable to a specified Hindu undivided family; the answer to the referred question was in the affirmative, in favour of the assessee and against the Revenue.

Ratio Decidendi: For applying the higher rate to a Hindu undivided family under the relevant finance provision, the decisive factor is the income of an individual member of the family, not the income of a smaller Hindu undivided family created on partition.

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