Clubbing of spouse and minor children's partnership income under the Income-tax Act fails where the partner acts in a representative capacity.

Section 64(1)(ii) of the Income-tax Act, 1961 does not apply to club the income of a spouse or minor children admitted to the benefits of partnership in the same firm where the relevant partner holds the firm interest only in a representative capacity for a Hindu joint family. The representative character of the partnership interest keeps the clubbing provision from operating against the individual in the manner urged by the Revenue. The view was therefore in favour of the assessee and against the Revenue.

---

---

Issues: Whether section 64(1)(ii) of the Income-tax Act, 1961 could be invoked to club the income of the wife or minor children, admitted to the benefits of partnership in the same firm, with the income of a partner who held an interest in the firm in a representative capacity.

Analysis: The question was governed by the existing binding view that where a person is a partner only in a representative capacity for and on behalf of a Hindu joint family, the income of the spouse or minor children arising from their admission to the benefits of the same partnership does not fall within the mischief of section 64(1)(ii). The representative character of the partner prevented the statutory clubbing provision from operating against the individual in the manner suggested by the Revenue.

Conclusion: Section 64(1)(ii) could not be invoked, and the answer was in favour of the assessee and against the Revenue.

---