Valid partnership income taxed only as share income, not as the Hindu undivided family's entire business income.

A valid partnership constituted by the karta and coparceners of a Hindu undivided family meant that the business income could not be assessed as the family's entire income. The tax consequence was limited to the assessee's share in the partnership profits, because once the partnership was recognised as valid, only that share income was attributable to the assessee in its hands. The Revenue's attempt to tax the whole business income of the partnership concern in the hands of the Hindu undivided family was rejected, and taxation was confined to the share income arising from the valid partnership.

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Issues: Whether the income from the partnership business in petroleum products could be assessed in the hands of the Hindu undivided family as its entire income, or only the assessee's share income from the valid partnership was taxable in its hands.

Analysis: The question arose under section 256(1) of the Income-tax Act, 1961, in the context of an earlier decision concerning the same partnership, where the partnership constituted by the karta and coparceners of the Hindu undivided family had already been held to be valid. Since the partnership was validly constituted, the income attributable to the assessee could not be treated as the entire business income of the family. Only the assessee's share in the partnership profits was liable to be considered for taxation in its hands.

Conclusion: The issue was answered in favour of the assessee and against the Revenue; only the assessee's share income from the partnership was taxable in its hands.

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