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PETITIONER: COMMISSIONER OF INCOME TAX,LUDHIANA, ETC. ETC.

       Vs.

RESPONDENT: SHRI OM PRAKASH, ETC. ETC.

DATE OF JUDGMENT16/11/1995

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) SEN, S.C. (J)

CITATION:  1996 AIR  593            1995 SCC  Supl.  (4) 737  JT 1995 (8)   245        1995 SCALE  (6)487

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T B.P. JEEVAN REDDY, J.      A conflict  of opinion  among the  High Courts  on  the meaning and  interpretation or  clauses (i) and (ii) of sub- section (1) of Section 64 (as they stood prior to 1st April, 1976) of  the Income  Tax Act,  1961 falls for resolution in this batch  of appeals.  Prior to  April 1,  1976  the  said clauses along with the explanation read thus:      (1). In  computing the  total income  of      any individual,  there shall be included      all such  income as  arises directly  or      indirectly --      (i) to  the spouse  of  such  individual      from the  membership of  the spouse in a      firm carrying  on a  business  in  which      such individual is a partner;      (ii) to a minor child of such individual      from the  admission of  the minor to the      benefits of  partnership in  a  firm  in      which such individual is a partner;      Explanation:- For  the purpose of clause      (i) the  individual, in  computing whose      total income  the income  referred to in      that clause  is to be included, shall be      the husband  or wife  whose total income      (excluding the  income  referred  to  in      that clause)  is greater;  and, for  the      purpose of  clause (ii),  where both the      parents are members of the firm in which      the minor child is a partner, the income      of the  minor child from the partnership      shall be  included in the income of that      parent whose total income (excluding the      income referred  to in  that clause)  is      greater, and  where any  such income  is

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    once included  in the  total  income  of      either spouse of parent, any such income      arising in any succeeding year shall not      be included  in the  total income of the      other  spouse   or  parent   unless  the      income-tax Officer  is satisfied,  after      giving  that   spouse   of   parent   an      opportunity of  being heard,  that it is      necessary so to do".      We may  make it  clear, at the outset, that whatever we say hereinafter is relevant only to the aforesaid provisions contained in clauses (i) and (ii) of Section 64(1), i.e., to clauses (i)  and (ii)  as they  obtained prior  to April  1, 1976.      The sub-section  opens with the words "in computing the total income  of any individual", and provides for inclusion of the  income arising  directly or  indirectly  to  persons specified in  the sub-section,  in the  situation  specified therein, in  the total income of such individual. Clause (i) says that where the spouse of an individual is the member of a firm  wherein the  individual is  a partner, the income of such  spouse  shall  be  included  in  the  income  of  that individual. The  Explanation contained  in  sub-section  (1) says that  among the  spouses, the income of the spouse with lesser income  shall be included in the income of the spouse having  larger  income.  It  does  not  matter  whether  the individual in  whose income  the income  of  the  spouse  is included is  husband or  wife. Clause  (ii) says that if the minor child  of such  individual is admitted to the benefits of the partner, the income arising to such minor child shall be  included   in  the   income  of   such  individual.  The Explanation clarifies  that where both the mother and father of a  minor child  are partners  in the firm (to benefits of which such minor child is admitted), the income of the minor child shall  be included  in the income of that parent whose total income  (excluding the  income referred  to in  clause (ii) ) is greater.      No difficulty  arises where the individual is a partner in the  firm as  an individual.  In such  a case, the income arising to  his/her  spouse  from  the  membership  of  such partnership  will   be  included   in  the  income  of  that individual. Similarly where the parent of a minor child is a partner in  his/her individual  capacity, the income arising to the  minor from  his admission  to the  benefits of  such partnership  will   be  included   in  the  income  of  that individual. Difficulty  has arisen  in a limited category of cases -  and these are such cases - where the husband/father is a  partner in  a firm  as the karta of an Hindu Undivided Family (H.U.F.). And this is the only question considered in this  Judgment.   In  such  cases,  the  plea  is  that  the husband/father is a partner in the firm not as an individual but as  the representative  of the  H.U.F.  and,  therefore, clauses (i)  and (ii)  have no  application.  Indeed,  three lines of  thought have  emerged regarding  the  meaning  and purport of  clauses (i)  and (ii).  They are:  (a) since the husband/father is  a partner not as an individual but as the karta of  the H.U.F.,  i.e., as  the representative  of  the H.U.F., clause  (i) and  (ii) of  sub-section (1) are not at all attracted;  in such a case the income of the wife or the minor child,  as the  case may be, cannot be included in the individual income  of  the  husband/father  under  the  said clauses; (b) clauses (i) and (ii) of sub-section (1) operate and apply  even where  the "individual"  happens to  be  the Karta of  the H.U.F.  In such  a case,  all that the clauses mean is  that the  income of the wife or the minor child, as

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the case  may be,  has to  be included  in the income of the H.U.F. (c)  even though the husband/father is a partner in a firm as  the karta  of H.U.F.,  be does  not cease  to be an individual, which  means that the income arising to the wife from the membership of such partnership firm - or the income arising to  his minor  child  from  being  admitted  to  the benefits of  such partnership  firm -  has to be included in the individual  assessment of such husband/father. In other. In other words, though the income of the wife/minor children cannot be included in the total income of the H.U.F., it has to  be   included  in  the  individual  assessment  of  such husband/father. It  does not matter that such husband/father has no separate individual income of his own; even in such a case, a  separate assessment  has to  be made upon him as an individual, in  which assessment  the income of the wife and the child  arising  on  the  aforesaid  account  has  to  be included.      We must  immediately say  what of  the three  lines  of thought aforesaid,  the second line of thought is foreclosed and is no longer available in views of the decisions of this Court in  L. Hirday  Narain v.  Income Tax  Officer, A.Ward, Bareilly  (78   I.T.R.  26),  Commission  of  Income-tax  v. Harbhajanlal (204  I.T.R. 361)  and Commissioner  of Income- tax, Gujarat v. Jayanthilal Premchand Shah (211 I.T.R. 111). We may  briefly refer  to the  ratio of  each of these three decisions.      In   Hirday Narain,  the assessee,   Hirday Narain, and his five  sons were  members of  H.U.F. His  accounting year relevant  to  the  Assessment  Year  1951-52  was  the  year commencing on  October 1,  1949 and  ending  with  September 30,1950.  During   the  said  accounting  year,  two  events occurred. On November 19, 1949 there was a partition between Hirday Narain and his five sons and on April 8, 1950 another son was  born to   Hirday Narain. Over-ruling the objections of the  assessee, the  Income-tax Officer made an assessment for the  entire year  in the status of H.U.F. On appeal, the Appellate Assistant  Commissioner treated  the  sum  of  Rs. 18,520/- as  being the  Income of  the former H.U.F. for the period October 1, 1949 to November 18, 1949 and directed its exclusion from the assessment. Pursuant to the directions of the Appellate Assistant Commissioner, the Income-tax Officer made two  assessments - one assessing the sum of Rs.18,520/- as the income of the former H.U.F. for the period October 1, 1949 to November 18, 1949 and the other assessing the income of Rs.  1,06,156/- for the remaining period as the income of the smaller  H.U.F., applying,  at the  same  time,  Section 16(3) (a)  (ii) of  the Indian Income Tax Act, 1922.  Hirday Narain then  made an  application  for  rectification  under Section 35  of the  1922 Act  claiming that in the matter of his assessment  in the  status of  H.U.F., Section 16(3) (a) (ii) cannot  be invoked. The Income-tax Officer accepted the plea but  declined to  give relief  on another  ground.  The assessee thereupon  approached the  High Court under Article 226 which matter was ultimately carried to this Court, Shah, J, speaking for the Bench (comprising himself and Hedge, J.) held that inasmuch as a son was born to  Hirday Narain after the partition on November 19, 1949 and before the end of the accounting year,  be could  not have  been  assessed  as  an individual for the period November 19, 1949 to September 30, 1950 and  that he  ought to have been assessed in the status of H.U.F.  Once this is so, the learned Judge held, "Section 16(3) (a)  (ii) plainly  did not apply and the income of the minor children  of   Hirday Narain  could not be included in the income of  Hirday Narain assessed as a H.U.F." It may be mentioned that Section 16(3) (a) (ii) considered in the said

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judgment is  in pari  materia with  clause (ii)  of  Section 64(1) (before  it was  amended with  effect  from  April  1, 1976).      In Harbhajanlal,  the question  again was  whether  the income arising  to  the  minor  children  from  their  being admitted to  the benefits  of a  partnership firm  could  be included in  the income of their father who was a partner in that partnership  firm as  the karta of the H.U.F. Following the decision  in   Hirday Narain,  this Court  (B.P.  Jeevan Reddy, and  S.P. Bharucha, JJ.) held that such inclusion was not  permissible.   No  further  contention  was  raised  of considered in the said decision.      In Jayanthilal  Premchand  Shah,  a  three-Judge  Bench comprising S.P. Bharucha, S.C. Sen and K.S. Paripoornan, JJ. held that  the income  of the  minors arising  on account of their being  admitted to  the benefits of a partnership firm cannot be  included in  the total income of their father who was a  partner of  the said  firm as the karta of the H.U.F. The aforesaid decisions are binding upon us. In this view of the matter, only two alternatives survive, i.e., (a) and (c) mentioned above, and we have to see which one is the correct one.      A majority  of the  High Courts  have adopted the first line of  thought aforesaid. The High Courts taking this view are Andhra  Pradesh, Gujarat,  Punjab  and  Haryana,  Delhi, Karnataka,  Bombay,  Madhya  Pradesh,  Kerala,  Guhati  and Rajasthan. It  is not necessary to refer to the reasoning of all these  decisions. It would suffice to note the reasoning of two  decisions, vis., Commissioner of Income-Tax v. Sanka Sankarajan (113 I.T.R.313), a decision of the Andhra Pradesh High Court,  the first one to take this view and that of the Full Bench  of the  Karnataka High  Court in  Arunchalam  v. Commissioner  of   Income-tax  (151   I.T.R.172).  In  Sanka Sankaraiah. it was held:      "This Section  (64(1)) applies  only  to      the computation  of total  income of  an      individual. The  expression ‘individual’      does not  comprehend in  its meaning the      ‘karta’ of  a joint  family. If  it were      the intention  of the  legislature  that      the  expression   ‘individual’  used  in      Section 64  should also  take in a Hindu      undivided family,  then  it  would  have      used the  expression ‘person’  so as  to      include a Hindu undivided family and not      the words  ‘spouse of such individual in      clause (i)’ or the words’ ‘a minor child      of such  individual in  clause (iii)’ or      the words  either spouse  or parent’  in      the Explanation.  This section  aims  at      putting an  end to  the attempts  of  an      individual  to   avoid  or   reduce  the      incidence of  tax  by  transferring  the      assets to a spouse or minor child. Under      this section, the husband’s share of the      profits of  a firm,  where  husband  and      wife and both partners could be assessed      in  the  wife’s  hands  or  vice  versa,      depending  upon  the  fact  whose  total      income is  greater. The  income  of  the      minor child  admitted to the benefits of      the  partnership   is  similarly  to  be      included in  the income  of that  parent      whose total income is greater".      It is  not necessary to state all the facts of the case

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except  the   following:  the   assessee,  Sanka  Sankariah, effected a  partition between himself and his two minor sons by way  of a  partial partition.  The Tribunal  accepted his plea that  even after the said partial partition effected on April 9,  19967, the  assessee constituted a smaller H.U.F., comprising himself,  his wife  and his  minor daughter.  The assessee and  his wife  constituted a  partnership,  to  the benefits of  which the  two minor  sons were  admitted.  The income received  by the  wife and the income received by the minor sons  from the  partnership  firm  was  sought  to  be included in  the individual income of the assessee which was objected to  by him,  whereupon the  following question  was referred for the opinion of the High Court:      "Whether,  on   the  facts  and  in  the      circumstances of  the  case,  the  share      incomes derived  by the  assessee’s wife      and minor  children could  be considered      in the  hands of the assessee-individual      under Section  64 of the Income-Tax Act,      1961?"      It is  on those  facts that  the observations aforesaid were made by the High Court.      In Arunachalam,  K.Jagannatha Shetty,  J. (as  he  then was), speaking  for the  Full Bench  of the  Karnataka  High Court pointed  out, in  the first  instance,  what,  in  his opinion,  is  the  essential  difference  in  tax  liability between the  Karta-partner and  other partners of a firm and then  proceeded   to  hold   that  the  income  accruing  to wife/minor  child  cannot  be  included  in  the  individual assessment of  the husband/father  in such a situation. This decision considers  cases of two different assessees. In the case of  one assessee,  his minor  sons were admitted to the benefits of  partnership of  which he  was a  member as  the karta  of  his  H.U.F.  The  other  was  a  case  where  the Commissioner directed,  under Section  263 of the Income Tax Act, 1961,  that the  share income of the wife and the minor sons of  the assessee be included in the total income of the assessee who  was a  partner in  that firm  as the  karta of H.U.F. The  Full Bench  held that  the share  income of  the wife/minor children  cannot be  included in  the  individual assessment of  the husband/father, for the reason that he is a partner not in his individual capacity but as the karta of the H.U.F., i.e., in a representative capacity.      The High  Courts which  have adopted  the third line of thought are Allahabad, Madras, Madhya Pradesh and Orissa. We may refer  to  the  reasoning  of  the  Full  Bench  of  the Allahabad High  Court in  Sahu Govind Prasad v. Commissioner of Income-tax  (144 I.T.R.  851). The  Full Bench holds that where the Karta of a H.U.F. is a partner in the firm wherein his wife  is also  a partner and/or to the benefits of which his minor  children are  admitted, the  income  accruing  to wife/minor children  has to  be included  in the  individual assessment of  the husband/father  though such income cannot be included  in the income of the H.U.F., i.e., in the share income received  by the  husband/father as  the karta of the H.U.F. The  ratio of  the Full  Bench is  to be found in the following observations:           "A partner,  being  an  individual,      has a dual capacity - representative and      personal. He  may  be  a  representative      i.e., a  karta qua  others  i.e.,  other      than partners.  But with his partners he      functions in  his personal capacity. The      relationship between  the  partner-karta      and the  other partners  is personal. He

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    does not  act with the other partners in      his   representative    capacity.   This      position does  not,  and  cannot  change      when the other partner is related to his      as  his   wife  or  minor  children.  To      repeat,   Section    64   requires    an      individual and  his  wife  and/or  minor      children to  be partners  of each other.      That    is     enough.    Their    other      relationships inter se are not relevant.      The fact  that he  is  also  the  karta,      quardian or  trustee of benamidar, etc.,      is immaterial.           An  HUF  is  itself  an  assessable      entity or unit. The income earned by the      karta is  taxed in the hands of the HUF.      No part  of such  income is  computed in      his individual  assessment. When Section      64 speaks  of ‘computation  of the total      income  of   any  individual’,   it   ex      hypothesi     excludes     from     such      computation, income  which is assessable      in the hands of the HUF. Section 64 does      not deal  with the  share income  of the      karta from  the firm.  It is confined to      the  clubbing   together  of  the  share      income of  the spouse  or minor children      of the  individual from  the firm,  with      such other  income  of  that  individual      status. It  is thus clear that the share      income of the karta from the partnership      firm is  not exigible  to tax  a  second      time under Section 64.           In  our  opinion,  the  phrase  ‘in      which  such  individual  is  a  partner’      occurring in Section 64 includes a human      being who  may be  the karta  of an HUF.      This is  what was  held by this court in      Madho Prasad’s  case (  (1978)  112  ITR      492). With  respect we  agree with  that      decision".      In Commissioner  of Income-tax  v. Shri  Manakram  (183 I.T.R. 382),  the Madhya  Pradesh High Court has pointed out that for  including the income of the wife/minor children in the  individual   assessment  of  the  husband/father  under Section 64(1),  it is  not necessary that the husband/father should have  separate individual  income of his own. Even if he has  no separate  individual income,  still the income of the wife/minor  children has  to be  included  by  making  a separate assessment  on the husband/father in his individual capacity.      While the  learned counsel  for the Revenue commends to us the view taken by Allahabad High Court at (what may be called the  third line  of thought), the learned counsel for the assessees  espouse the first line of thought accepted by the  Andhra   Pradesh,  Karnataka   and  other  High  Courts mentioned above.      In the  Indian Income  Tax  Act,  1922,  as  originally enacted, there  was no  provision  like  the  one  concerned herein. Section  16(3) providing for the same was introduced only in  the year  1937. The constitutional validity of this provision was  questioned in  Balaji v.  Income-Tax Officer, Special Investigation Circle (1962 (2) S.C.R. 983). It would be appropriate  to refer to some of the reasons given by the Constitution Bench  while upholding the validity. Subba Rao,

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J., speaking for the Court, observed, in the first instance, that the  beneficial provision  made in  the Income-tax  for distributing the  profit made  by the partnership firm among its partners  also provided  an effective  device  to  evade taxation. "A  husband or  a father  could nominally take his wife or  his minor  sons in partnership with him so that tax burden  be   lightened,..........This  device   enables   an assessee to  secure the entire income of the business but at the same  time to  evade  income-tax  which  he  would  have otherwise been liable to pay." The learned Judge pointed out that said provision was made pursuant to the recommendations made by the Income-tax Inquiry Commission, 1936 as a measure of plugging  the loopholes  in  the  Act.  Inasmuch  as  the validity of  the provision  was questioned  on the ground of violation of  Article 14,  the learned  Judge  examined  the principles underlying  the said  Article and  held that  the provision which  included the  income derived by wife and/or minor children  alone in  the income  of the  husband/father while not  including the  income of  others does  not suffer from discrimination.  The learned  Judge observed  that  the argument based  upon violation  of Article  14  ignores  the object of  the Legislation, viz., to prevent evasion of tax. Learned  Judge   observed:  "A   similar  device  would  not ordinarily be  resorted to  by individuals  by entering into partnership with  persons other  than those mentioned in the sub-section, as  it would  involve a risk of the third-party turning round and asserting his own rights. The Legislature, therefore, selected  for the  purpose of classification only that group  of persons  who in  fact are  used as a cloak to perpetrate fraud  on taxation." The learned Judge then dealt with the  argument that there might be a genuine partnership between an individual and his wife and that such a situation is not saved by the said provision. He held: "In demarcating a group,  the net  was cast  a  little  wider,  but  it  was necessary, as  any further sub-classification as genuine and non-genuine partnerships  might defeat  the purpose  of  the Act......There is  a greater scope for fraudulent evasion by constituting fictitious  partnership along  with one’s  wife and minor  children than in a case of separate income of the spouses  derived  from  different  sources......... When the Legislature of  the country,  which is  assumed to  know the conditions of  the people  and their  requirements, with the awareness of this particular widespread fraudulent device in the matter  of evasion  of taxes,  made a law to prevent the said fraud, it is difficult for this Court in the absence of any counter-balancing  circumstances to hold, on the analogy drawn from  American decisions, that the need for such a law is not  in existence."  The learned  Judge also rejected the attack upon  the constitutionality  of  the  said  provision based on  Article 19(1)  (g) holding  that it  constituted a reasonable restriction which was found necessary "to prevent the prevalent abuse, namely, evasion of tax by an individual doing business  under a  partnership nominally  entered with his  wife  or  minor  children."  The  learned  Judge  added finally, "This  mode of  taxation may  be a little hard on a husband or  a father in the case of genuine partnership with wife or  minor children,  but that  is offset,  to  a  large extent, by  the beneficient  results that  flow therefrom to the public, namely, the prevention of evasion of income-tax, and also  by the  fact that,  by and  large, the  additional payment of  tax made  on the income of the wife of the minor children will  ultimately be  borne by  them  in  the  final accounting between them."      While enacting  Section 64  of the Income-tax Act, 1961

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the Parliament  kept in  view the  decision of this Court in Commissioner of Income-Tax v. Sodra Devi (32 I.T.R. 615) and the report  of the  Direct  Taxes  Administration  Committee 1958-59. Section  64 basically  carried forward  the idea in sub-section 3  of Section  16 of  the Indian Income-Tax Act, 1922, no  doubt, with  certain modifications.  One constant, however, remained, viz., the provisions contained in clauses (i) and  ii) of  Section 64(1)  were confined  only  to  the partnership income.  Now, what  are the  ingredients of  the sections? The  opening words  are "in  computing  the  total income of  any individual".  Then it proceeds to say that in the total  income of  such individual  shall be included the income of  his spouse  arising from  the membership  of such spouse in  the partnership  firm in which such individual is the partner.  It proceeds  further and  says that the income arising to  the minor  children of  such individual  who are admitted  to   the  benefits  of  partnership  wherein  such individual is  a partner shall also be included in the total income of  such individual.  Now  an  individual  can  be  a partner in  a partnership  firm in is individual capacity or in the  capacity of  the karta  of a  H.U.F.  or,  for  that matter, in any other capacity, e.g., as a trustee. There may be a  firm comprising  an individual  and his wife, to which their minor  children are admitted. There can also be a firm comprising two or more individuals wherein the wife/wives of one or  more of  the partners  are also  partners. The minor children of  one or  more of the partners may also have been admitted to  the benefits  of the partnership firm. In fact, there can be any number of situations where the wife is also a partner  along with  her husband  in a partnership firm or where the  minor children  of an  individual are admitted to the benefits  of a  partnership firm wherein that individual is a  partner. So  far as  other partners in the partnership firm are  concerned, they  are not  really concerned in what capacity a  particular person is a partner, e.e., whether as an individual,  as a  karta, as  a trustee  or otherwise. To them, he  is an  individual, a  person. This  aspect however becomes relevant  as between  the partner  and those whom he represents in  the partnership  firm. To wit, where a person is a partner as the karta of a H.U.F., the capacity in which he is  a partner  in the  partnership firm  in  relevant  as between him  and the  other members  of the  H.U.F. For, the income the karta receives as a partner is not his individual income; it is the income of the H.U.F. and he receives it on behalf of  the H.U.F.  It is for this reason that the income of  the   wife  and   minor  children   arising  from  their membership/admission to the benefits of partnership firm, is held not  includible in  the income  of the H.U.F. since the total income  of H.U.F.  is not  the  total  income  of  the individual (husband  or father,  as the  case may  be).  For Section 64(1)  to get  attracted, it  is necessary  that the husband/father should  be a partner in a partnership firm as an individual,  i.e., in  his individual capacity. It is not attracted where  he is  a partner  as the karta of H.U.F. to which such  wife and/or  minor children  belong. This is the holding of  the decisions  of this  Court in  Hirday Narain, Harbhajanlal and  Jayantilal Premchand  Shah. It  may not be quite apt to say that vis-a-vis the members of the h H.U.F., the  karta is  still an  individual and,  therefore, such income of wife and minor children should be included in the income  of the  karta  derived  as  karta.  Nor  are  we satisfied that such income of the wife and/or minor children should be  included in  the  individual  assessment  of  the karta. Indeed, the argument is that even if the karta has no individual income  of his  own, even then the said income of

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the  wife   and  children   should  be   included   in   the husband/father’s individual  assessment  by  making  such  a separate assessement.  This argument  ignores the  fact that the husband/father  is a partner in the partnership firm not in his individual capacity but as the karta. It also ignores the clear language employed in clauses (i) and (ii). In each of these  two  clauses,  the  expression  "such  individual" occurs twice. Firstly, the "individual" must be a partner in a firm and the wife and/or minor children of such individual must also  be deriving  income from  such  partnership  firm (either on  account of her membership or on account of being admitted to  the benefits  of partnership,  as the  case may be). For  the purposes of clauses (i) and (ii) it is not his capacity vis-a-vis  other  partners  of  the  firm  that  is relevant but  his capacity  vis-a-vis his  wife and/or minor children. If  this basic  fact is ignored, anomalous results may follow  as indicated by the Andhra Pradesh High Court in Sanka Sankaraiah.      The learned  counsel for  the Revenue  says that if the above view  is taken  by  this  Court,  the  very  objective underlying the  said clauses  - and  emphasized  in eloquent terms in  Balaji -  would be  defeated. The result would be, learned counsel  says, the income of, say the minor children arising from  their being  admitted to  the  benefits  of  a partnership firm  can neither  be included  in  the  H.U.F’s income nor  can it  be included in the individual assessment of the  father in  a case where the father is partner in the firm as the karta of that H.U.F. This confers an undue - and an unfair - advantage to Hindus among whom alone the concept or Hindu  undivided family  obtains. While  members of other communities, among  whom the  concept  of  H.U.F.  does  not obtain,  would   be  directly   in  the  path  of  the  said provisions, the  Hindus would  be escaping the rigour of the said provisions  through the  device  of  H.U.F.,  says  the learned counsel.  There is  certainly a fair amount of force in this  submission but  this is  an argument really against the very concept, and the permissibility of such concept, in the Income Tax Act. We are not unaware of the criticism that very often  H.U.F. is  being used  to deny the State the tax legitimately due  to it. But that is a larger question which does not  arise in these case. As a matter of fact, wherever the Parliament  has thought  it fit,  it has  intervened  to checkmate the  evil, e.g.,  sub-section (2)  of Section 4 of the Gift  Tax Act  inserted by  Finance (No.2) Act, 1971 and sub-section (1A)  of Section 4 of Wealth Tax Act inserted by the very  same Finance  Act. Similarly,  sub-section (2) was introduced in  Section 64  by the  Finance  Act,  1979  with effect from  April 1,  1980. Then Explanation 3 was added by the Taxation  Laws (Amendment)  Act, 1975  with effect  from April 1,  1976, but  clauses (i) and (ii) in sub-section (1) remained untouched [except for the deletion of the words "of which  such   individual  is  a  partner"  in  clause  (iii) corresponding to  clause (ii)]  until they  were deleted  by Finance Act, 1992 w.e.f. April 1, 1993 and insertion of sub- section (1A)  - with  which aspects  we  are  not  concerned herein. Suffice  it to  say that on the language employed in the sub-section  and the  clauses concerned herein, the view taken by it may possibly be the only view possible. Majority of High  Courts too  have accepted this view. It cannot also be said  that the  view taken  by us militates in any manner against the  ratio of  Balaji nor does it tend to defeat the object of the provisions as explained in the said decision.      We must  make it  clear that we have merely interpreted clauses (i)  and (ii)  of sub-section  (1) of Section 64, as

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they stood  before April  1, 1976, We have not gone into the facts of  the individual  cases before  us. That is a matter for the  authorities under  the  Act  to  enquire  into  and pronounce upon.      For the above reasons, we hold that where a person is a partner in a partnership firm not in his individual capacity but as  the karta of the H.U.F., neither the income accruing to his  wife on  account of  her being a partner in the same partnership firm  nor  the  income  accruing  to  his  minor children on  account of their being admitted to the benefits of such  partnership firm,  can be  included  in  the  total income of such person - neither in his individual assessment nor in  the assessment of the H.U.F. Our holding is confined to the above situation alone.      All the  appeals are  disposed of  with  the  aforesaid enunciation of  legal position.  The Income-tax  Tribunal or the other  concerned authorities  under the Act, as the case may be,  shall pass orders in each of these individual cases in accordance with the above legal position.      No costs.