Clubbing of minors' partnership income fails where the parent is only karta of a Hindu undivided family.

Income of minor children admitted to the benefits of a partnership firm was not includible in the assessee's individual assessment where he was a partner only as karta of a Hindu undivided family. The Court treated section 64(1)(ii) of the Income-tax Act, 1961, as in pari materia with the corresponding provision in the 1922 Act before the 1975 amendment, and applied the earlier interpretive principle. On the facts, the assessee had no individual partnership capacity, so the minors' share income could not be clubbed in his hands. The same reasoning applied to the connected issue under section 64(1)(i) because the factual position was identical.

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Issues: Whether the income of minor children admitted to the benefits of a partnership firm could be included in the income of the assessee where the assessee was a partner only in his capacity as karta of a Hindu undivided family under section 64(1)(ii) of the Income-tax Act, 1961, and the allied question under section 64(1)(i).

Analysis: The governing principle was taken to be the earlier decision construing the corresponding provision in section 16(3)(a)(ii) of the Indian Income-tax Act, 1922, which was treated as in pari materia with section 64(1)(ii) of the Income-tax Act, 1961 as it stood before the 1975 amendment effective from 1 April 1976. On the facts, the assessee was not a partner in his individual capacity but only as karta of a Hindu undivided family. In that situation, the income accruing to the minors from their admission to the benefits of the partnership could not be clubbed in the assessee's individual assessment. The same principle was applied to the connected appeals under section 64(1)(i) where the factual position was identical.

Conclusion: The inclusion of the minors' income in the assessee's hands was not permissible on the facts found, and the Revenue's challenge failed.

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