Hindu Undivided Family income not includible in karta's assessment where sons were admitted as partners

Income derived from firms in which the karta admitted his sons as partners, and income earned by unseparated coparceners from properties acquired with Hindu undivided family funds, was not includible in the assessee-karta's assessable income. Applying its earlier ruling in the connected reference, the HC held that the absence of capital contribution from the sons' self-acquired funds did not prevent their admission as partners, and registration or continuation of registration could not be refused on that ground. On that basis, the income in question was excluded from the assessee's income, in favour of the assessee and against the Revenue.

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Issues: Whether the income derived from M/s. Curious House, M/s. Birdhichand Pannalal, Birdhichand & Sons, and the income earned by the unseparated coparceners from properties acquired out of Hindu undivided family funds was includible in the assessee's income as karta of the Hindu undivided family.

Analysis: The question stood concluded by the court's earlier decision in the connected reference, where it was held that the assessee, acting as karta, could admit his sons as partners even without capital contribution from their self-acquired funds, and that registration or continuation of registration of the firm could not be refused on that basis. Applying that holding, the income of the firms and the income earned by the unseparated coparceners from properties acquired out of Hindu undivided family funds could not be treated as part of the assessee's assessable income.

Conclusion: The income in question was not includible in the assessee's income. The issue was answered in the affirmative, in favour of the assessee and against the Revenue.

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