Hindu Undivided Family Income from Partnership Firm: Individual Assessment under Income-tax Act

The court held that the entire sum received by a Hindu undivided family from a partnership firm should be included in the individual assessment of the assessee under section 64(2)(b) of the Income-tax Act, 1961. The income derived from the converted property was deemed to arise to the individual, not the family, based on the provisions of the Act and previous case law. The court ruled in favor of the Revenue and against the assessee, citing relevant precedents and interpretations, with no costs awarded.

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Issues:
1. Whether the entire sum received by a Hindu undivided family from a partnership firm is includible in the individual assessment of the assessee under section 64(2)(b) of the Income-tax Act, 1961.

Analysis:
The judgment pertains to the assessment year 1976-77, where the assessee, as karta of a Hindu undivided family, invested separate funds into a partnership firm. The family received interest and profit from the firm, leading to the question of whether the entire sum should be included in the individual assessment of the assessee under section 64(2)(b) of the Income-tax Act, 1961. The Tribunal held that the income derived from the converted property should be deemed to arise to the individual and not to the family, based on the provisions of the Act.

The court was referred the question of law regarding the inclusion of the entire profit and interest from the partnership firm in the individual assessment of the assessee. Citing the case of P. Nagalingam v. CIT, where a similar situation arose, the court agreed with the precedent. In the Nagalingam case, a sum was converted into an asset of the Hindu joint family, and the income derived from the converted property was assessed as the personal income of the assessee. The court emphasized that section 64(2)(b) of the Act deems income from converted property to arise to the individual, not the family.

The court also referenced a similar decision by the High Court of Allahabad in CIT v. Mulkh Raj and Sons, further supporting the interpretation that income derived from converted property is to be assessed as the individual's income. Therefore, the court answered the reference in favor of the Revenue and against the assessee, stating that the entire sum received by the Hindu undivided family from the partnership firm should be included in the individual assessment of the assessee under section 64(2)(b) of the Income-tax Act, 1961. No costs were awarded in this judgment.

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