Holding

The term 'individual' in Section 64(1)(i) and (ii) of the Income Tax Act, 1961 does not include a Karta of a Hindu Undivided Family, so the income of the Karta’s spouse or minor children cannot be clubbed in his total income.

Summary

The respondent, Om Prakash, was a partner in two partnership firms in his capacity as Karta of a Hindu Undivided Family (HUF). The Income Tax Officer included the share of income earned by his minor children in his total income under Section 64(1)(i) and (ii) of the Income Tax Act, 1961. The assessee challenged this, arguing that a Karta is not an "individual" for the purposes of Section 64 and that the income of his spouse or minor children should not be clubbed with his. The Supreme Court held that the expression "individual" in Section 64(1) is to be given a restricted meaning and does not encompass a Karta of an HUF, whose income is a separate tax entity. Consequently, the income of the Karta’s spouse or minor children cannot be included in his total income. The Court dismissed the Revenue’s appeal and affirmed the orders in favour of the assessee.

Issues considered

The meaning of the term 'individual' in Section 64(1)(i) and (ii) of the Income Tax Act, 1961 with respect to a Karta of a Hindu Undivided Family.
Whether income of a Karta’s spouse or minor children admitted to a partnership can be clubbed in the Karta’s total income under Section 64.

Legislation cited

Income Tax Act, 1922s. 16(3)(a)(i), s. 16(3)(a)(ii)
Income Tax Act, 1961s. 2(31), s. 2(7), s. 4, s. 64(1)(i), s. 64(1)(ii)

Subjects

Section 64clubbing of incomeindividualKartaHindu Undivided FamilyIncome Tax Act 1961tax evasionpartnershipminor childspouseinterpretation

Judgment

A COMMISSIONER OF INCOME TAX, LUDHIANA
v.
OM PRAKASH

JULY 27, 1999

B [S.P BHARUCHA, B.N. KIRPAL, S. RAJENDRA BABU,
S.S.M. QUADRI AND M.B. SHAH, JJ.]

Income Tax Act, 1961:

C 1
Income tax S.64(/)(i) and (ii) (as it stood prior to 1-4-1976)- clubbing
of income- Applicability of-To Karta of HUF-Assessee was a partner in a
partnership firm in his capacity as Karta of HUF-Minor children of the said
assessee admitted to benefits of partnership-Held: The expression
"individual" occurring in S.64(i)and(ii) does not include Kar!a of HUF-
Hence, the income arising to spouse or minor child of Karta of HUF cannot
D be included in the computation of his total income-Income of such Karla
-~s income of the HUF and not his individual income-Income Tax Act, 1922,
S.16(3)(a)(i) and (ii) (as inserted in 1937).
/

Income Tax S.64(1) (as it stood prior to 1-4-1976)-0bject of-Held:
Object is, like S. I 6{3)!!/_ !T Act, I 922, it is to prevent evasion of tax by an ·
E individual doing business under a partnership with his wife/minor children.

Income tax-S.64(1) (as it stood prior to 1-4-1976)-Expressions
"individual" and "such individual" occurring in S.64(i) and (ii) cover both
male.and female, unlike S.16(3) of IT Act, 1922. -
F Hindu Law:

. Joint family-HUF-Karta-partner in a partnership firm-And also
an assessee under Income Tax Act-Status of-Explained.

Words and Phrases:
G
"lndividual"-Meaning of-Jn the context of S.64(/)(i) of the Income
Tax Act,1961

"Such individual"-Meaning of-In the context ofS.64(ii) of the Income
Tax Act, 1961.
H 1186
C.l.T. v. OM PRAKASH 1187
"Assessee"-Meaning of-In the context of S.2 (7) of the Income Tax A
Act, 1961.

"Person"-Meaning of-In the context of S.2(31) of the Income Tax
Act, 1961.

The respondent-assessee was partner in a partnership firm in his B
capacity as Karta of the Hindu Undivided Family. Two minor children of the
respondent were admitted to the benefits of the partnership. They were also
partners in another partnership firm. The Income Tax Officer (ITO) included
the income arising in the hands of the minor children in the respondent's
total income for the assessment year 1973-74 under Section 64(1) (i) and
(ii) of the Income Tax Act, 1961. The Appellate Assistant Commissioner C
upheld the order of the ITO. However, the Income Tax Appellate Tribunal set
aside the order of the Appellate Authority. But the High Court allowed the
respondent's appeal. Being aggrieved the appellant-Revenue preferred the
present appeal.
D
Initially a two-Judge Bench of this Court upheld the judgment of the
High Court. But, on review, that judgment was set aside. However, in the
meanwhile, a three-Judge Bench of this Court approved it in CIT v. S.S.
Krishnamoorty, (TRC Nos.6 to 10 of 1982). Thereafter, when this case came
up before a three-Judge Bench, that Bench referred this case to a larger
Be~ E
Dismissing the appeal, this Court

HELD : 1. The precursor of Section 64(1) of the Income Tax Act, 1961
was Section 64(3)(a) (i) and (ii) of the Income Tax, Act 1922 (as inserted in
1937) which was enacted to prevent evasion of tax by an individual doing F
business under a partnership entered with his wife and/or minor children.
The said provision of the 1922 Act is embodied in Section 64(1) of the 1961
Act with the changes that the word 'wife' is replaced by the word 'spouse'
in Section 64(l)(i) and the Explanation is added thereto. Now, both the male
and the female are covered by the expressions 'any individual' and 'such G
individual' in Section 64(l)(i) and(ii) of the 1961 Act. (1193-C]

Balaji v. ITO (1961) 43 ITR 393 and CITv. Sodra Devi, (1957)32 ITR
615, referred to.

2.1. When a Karta of the Hindu Undivided Family is a partner in a lf
1188 SUPREME COURT REPORTS [i 999] 3 S.C.R.

A partnership firm, he has dual capacity; qua the partnership, he fun.ctions in
his personal capacity and qua third parties, in his representative capacity.
Under the Income Tax Act, when he is· assessed in respect of the income
derived by him from the partnership firm as a partner, it is in his
representative capacity as .Karta of the Hindu Undivided Family and not as
. an individual as such. Therefore, the income of a Karta's spouse/minor child
B cannot be included in computation of his total income for that is the income
of the Hindu Undivided Family and not bis individual income. Section 64 of
the 1961 Act will be attracted only when an assessee's own income is being
ass"5sed and not that ofan Hindu Undivided Family. [1195-B-D]

C CITv. Bagya/akshmi & Co. (1965}55 ITR 660, L. Hirday Narain v. ITO
(1970)78 ITR 26; CIT v. Harbhajan Lal, (1993) 204 ITR 361 and CIT v.
Jayantila/ Prem Chand Shah, (1995)211 ITR 111, affirmed.

2.2. Under Section 4 of the 1961 Act, the total income of the previous
year or years or every person is charged to tax. Section 2(31) of the 1961
D Act shows that both 'an individual' and 'a Hindu Undivided Family' are, inter
a/ia constituents ofthe meaning of the term 'person'. The expression 'any
individual' is narrower than the terms 'person' and 'assessee' defined in
Section 2(7); an individual is a person but every person need not be an
individual. So also an individual may be an assessee but every assessee need
E not be an 'individual'. Thus individual in Section 64(l)does not take in .Karta
of the Hindu Undivided Family within its import. [1196-E-F]

Concise Oxford Dictionary, referred to

· 2.3. Moreover, Section 64(1) speaks of the total income of any individual
F and the total income of Hindu Undivided Family need not be the total income
of the .Karta as an individual. Therefore, merely on the ground that the .Karta
or a Hindu UndMded Family will draw an unfair advantage of this interpretation,
this Court cannot enlarge the meaning of the term 'individual' by the process
of interpretation so as to rope in the Karta within the meaning of the term
'individual'. (1196-G; 1197-C]
G 3. Hence, it has to be held that the income in the hands of the Kana
of the Hindu Undivided Family as a partner of a partnership firm cannot be
treated as income of an individual and, therefore, the income arising to the
spouse or minor child of the Karta or the Hindu Undivided Family eannot be k

included in his income as such under Section 64(1)(1) and (ii) of tli'e 1961
H Act. Thus the expressions 'any individual' and 'such individual' in Section
~ -
C.l.T. v. OM PRAKASH [S.S.M. QUADRI, J.] · 1189
64(1)(i) and (ii) are employed in a rutricted sense and do not include a Karta A
ofa Hindu Undivided Family. [1197-D-E)

CITv. Om Prakash (1996) 217 ITR 785 and C/Tv. S.S. Krishnamoorty
(TRC Nos. 6 to 10of1982), affirmed.

CITv. San/ca Sanlcaraiah (1\78) 113 ITR 313 (AP); Dinubhai Ishvar/al B
Patel v. K.D. Dixit, (1979) 118 ITR 122 (Guj); CITv. Anand Sarup, (1980)
121 ITR 873 (P&H); Prayag Dass Rajgarhia v. CIT, (1982)138 ITR 291 (Del)
and Arunachalam v. CIT, (1985) 151ITR172 (Kant) (FB), approved.

Sahu Govind Prasad v. CIT (1983) 144 ITR 851 (All) (FB), Madho
Prasadv. CIT, (1978)112 ITR 492 (All); C/Tv. S.Balasubramanium, (1984) C
147 ITR 732 (Mad) and CIT v. Mana/cram, (1990) 183 ITR 382 (MP),
overruled.

CIVIL APPELLATE JURISDICITON : Civil Appeal No. 4.234 of
1983 Etc. Etc.
D
From the Judgment and Order dated 29 .10.79 of the Punjab and Haryana
High Court in l.T.R. No. 153of1979.

C.S. Vaidyanathan, Additional Solicitor General, Barish N. Salve, P.C.
Jain, Ranbir Chandra, S.K. Dwivedi, G.V. Rao, S.Rajappa, S.Wasim A. Quadri, E
Shivram, Jayant Tripathi, B.K. Prasad, S.N. Terdol, Ravi Kumar, P. Venugopa~
P.S. Sudheer K.J. Jhon, (Ms. Janaki Ramachandran, S.C. Patel and Sunil Kumar
Jain) (NP), S.K. Chander, Vivek Sood, Uma Datta, Raj Kumar Mehta, Ms.
M.Sarada, Shankar Vaidialingam, K.H. Nobin Singh, M.N. Shroff, Krishan
Mahajan, (Ms. R.Deepamala) for P.H. Parekh and Balbir Singh Gupta for the
appearing parties. F
The Judgment of the Court was delivered by

S.S.M. QUADRI, J. Leave is granted in S.L.P.(C) No.1608/80.

The common question posed in these cases relates to interpretation of G
the term "individual" in Section 64 (1) (i) & (ii) of the Income Tax Act, 1961
(as it stood prior to April 1, 1976). The conflict of judicial opinion of various
High Courts with regard to connotation of that term gave rise to these cases,
which needs to be resolved by this Court.

For appreciating the question involved in these cases, it will suffice to H
1190 SUPREME COURT REPORTS [1999) 3 S.C.R.

A refer to the facts in Civil Appeal No. 4234 of 1983 which pertains to· the
I-
assessment year 1973-74. The respondent was a partner in the partnership ~
~
firm, Mis.Rockman Cycle Industries, Ludhiana in his capacity as Karta of the
Hindu Undivided Family. Two minor children of the respondent, a daughter,
':
Miss Neeru, and a son, Pankaj, were admitted to the benefits of the partnership.
Similarly, they were also partners in another partnership firm, Mis. Munjal
B Gases, Ludhiana. The income arising in the hands of minor children was
sought to be included in his total income. That was objected to by him on
the ground that he was a partner in the firms in the capacity of Karta of the
Hindu Undivided Family, so Section 64 of the Income Tax Act did not apply.
The Income T~ Officer rejected that contention, included the share income ~

c of the minors in his total income and assessed him accordingly. The Appellate
Assistant Commissioner upheld the order of the assessing authority, in appeal.
On further appeal, the Income Tax Appellate Tribunal, Amritsar set aside the I<

order of the Appellate Authority taking a contrary view and thus allowed the t
'
appeal of the respondent. Out of that order, at the instance of the Revenue,
the following question was referred to the High Court under Section 256(1)
D of the Income Tax Act, 1961 :
,_

"Whether on the facts and in the circumstances of the case the
Appellate Tribunal was right in law in holding that the income of the
I
minor children of the assessee from the two firms was not includible
in his individual assessment under Section 64 (l) (i) & (ii) of the
"
E IMom(: Tax Act, 1961."

A Division Bencb of the High Court of Punjab & Haryana answered the
question in the affirmative, in favour of the respondent-assessee and against -
the Revenue in Income Tax Reference No.153 of 1979 by its order dated
October 29, 1979. Against the said order and judgment of the High Court, the
F
Revenue is in appeal before this Court. Initially, a two-Judge Bench of this
Court in Commissioner of Income-Tax & Ors. v. Shri Om Prakash & Ors.,
(1996) 217 ITR 785, confirmed the judgment of the High Court and dismissed
r
the appeal. Bu~ on review, that judgment was set aside. However, in the
meanwhile, a three-Judge Bench of this Court approved it in Commissioner
G of Income-Tax, Madurai v. Shri S.S. Krishnamoorthy, Dingigul, [TRC Nos.6
to 10 of 1982]. Thereafter, this case came up for hearing before a bench of
three learned Judges who referred it and other connected cases to a larger
Bench and thus all the cases have come up before us.

On the question whether a Karta of the Hindu Undivided Family falls
H in the term "individual" in Section 64 (1) (i) & (ii) of the Income-tax Act, 1961
' C.I.T. v. OM PRAKASH [S.S.M. QUADRI, J.] 1191
(hereinafter referred to as 'the 1961 Act'), there is divergence of opinion in A
various High Courts. The High Courts of Andhra Pradesh, Gujarat, Punjab &
Haryana, Delhi, Kamataka, Kerala, and Rajasthan took the view that the Karta
of the Hindu Undivided Family did not fall within the meaning of the expression
"individual" in Section 64(1) (i) & (ii) of the 1961 Act. The High Courts of
Allahabad, Madras, Madhya Pradesh and Orissa took the contrary view.
B
We have. heard learned counsel appearing for the Revenue and
assessees.

Here, it is useful to refer to Section 64( l) of the 1961 Act, as it stood
prior to 1.4.1976. It read thus : C
"(l) 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; D
(it) 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 E
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 F
income (excluding the income referred to in that clause) is greater; and
where any such income is once included in the total income of either
spouse or 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 or G
parenf an opportunity of being heard, that it is necessary so to do."

This provision occurs in Chapter V of the Act which deals with income
of other persons included in assessee's total income. It provides that in
computing the total income of any individual all such income arising directly
or indirectly (i) to the spouse of such individual from the membership of the H
1192 SUPREME COURT REPORTS [1999] 3 S.C.R.

A spouse in a firm; and (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, shall be included in computing the total income of such individual.
The Explanation directs that for purposes of clause (i) partnership income of
the spouse shall be included in the income of the spouse of such individual
(husband or wife) whose total income, excluding the income in question, is
B greater. So also for purpose of clause (ii) it provides that where both such
individual and the spouse are members of the partnership in which the minor
child is also a partner, the income in question has to be included in the income
of that parent whose total income excluding the income in question, is greater.
The same position will apply to the succeeding year also unless the Income
C Tax Officer holds otherwise after due notice to the spouse or parents.

The precursor of this provision was Section 16(3)(a)(i) and (ii) of the
Income Tax Act, 1922 (hereinafter referred to as 'the 1922 Act') as amended
by Act IV of 1937. While upholding the constitutional validity of the said
provision of the 1922 Act, a Constitution Bench of this Court in Balaji v.
D Income-Tax Officer, Special Investigation Circle, Ako/a & Ors., (1961) 43 ITR
393 observed :

"But it (the relevant provision of the Income- Tax Act which enabled
the share of each partner of a registered firm to add to his other
income for being charged as part of his total income) gave an effective
E handle to evade taxation in another direction. A husband or a father
I
could nominally take his wife or his minor sons in partnership with
him so that the tax burden might be lightened, for, if the income was
divided between a numper of people, the income derived by an
individual therefrom might fall under the limits of taxable income pr
F under a less onerous slab. This device enables an assessee to secure
the entire income of the-'business but at the same time to evade
income tax which he wohld have otherwise been liabl~ to pay."

Section 16(3)(a)(i) & (ii) was enacted to prevent evasion of tax by an. ....
individual doing business under a partnership entered with his wife and/or
G minor children. It may be noticed here that in that case the appellant did not
base his challenge to the said provision as Karta of the Hindu Undivided
FamjY..
The import of the expression 'any individual' in Section 16(3)(a) of the
1922 Act fell for consideration of this Court in Commissioner ofIncome-Tax,
H Madhya Pradesh-and Bhopal v. SodraDevi (1957) 32 ITR 615. There Sodra
' C.l.T. v. OM PRAKASH [S.S.M. QUADRI, J.] 1193
Devi and her major children formed a partnership firm to which her minor A
children were admitted to the benefits of the partnership. Under the said
provision, share income of the minor children in the partnership was sought
to be added in the income of Sodra Devi. It was contended that the expression
'any individual' did not include 'the female' so the said income of the minor
children was not includible in the total income of their mother. By a majority, B
that contention was accepted holding that the words 'any individual' and
'such individual' occurring in Section 16(3) are restricted in their connotation
to mean only the male but not the female of the species.

The said provision of the 1922 Act is embodied in Section 64( I) ~f the
1961 Act with the changes that the word 'wife' is replaced by the word C
'spouse' in clause (i) of Section 64(1) and the explanation is added thereto.
Now, both the male and the female are covered by the expressions 'any
individual' and 'such individual' in Section 64(l)(i) and (ii) of the 1961 Act.

Here again interpretation of the same expression arises, albeit in a
different context. We have to discern the true meaning of the term 'individual' D
to resolve the conflict and to decide whether the High Court is right in
answering the question, extracted above, the way it did.

It has been noticed above that to attract the provisions of Section 64(1)
(i) and (ii), the spouse/minor child should be a partner in the partnership firm
carrying on a business in which 'any individual' is a partner. It is only then E
the share income of the spouse/minor child from that firm can be included in
the computation of the total income of such individual. The income arising
to such individual need not necessarily be from the partnership firm alone.
If such individual has nil income from the partnership firm but has income
from other sources then the income of the spouse/minor child from the F
.partnership firm in which such individual is a partner will be added to that
other income of such individual. There is no controversy on this aspect.
What is put in issue is that when a Karta of the Hindu Undivided Family is
• a partner in the firm, he cannot be regarded as an individual for purposes of
Section 64(1) (i) and (ii) of the 1961 Act.
G
Now, what does the term 'individual' mean? It is not defined in the Act.
It is not a term of art. The meaning of term 'individual' given in the Concise
Oxford Dictionary is :

"single, particular, special; not general, having a distinct character,
characteristic of a particular person, designed for use by one person, H
1194 SUPREME COURT REPORTS [1999) 3 S.C.R.

A a single member of a class, a single human being as distinct from a
family or group, a person (a most unpleasant individual)".

In contradiction to a class or a family, the term is used to denote a single
person, may be a male or female of the species. In a wider sense, a Karta, a
trustee, or any one acting in a representative capacity will also be within the
B ambit of the term. Is it, in that sense, that the said term is used in Section
64(1) (i) and (ii) of the 1961 Act or is it used only in a narrower sense of one
entity, one distinct being, not in a representative capacity? The Full Bench
of the High Court of Allahabad in Sahu Govind Prasadv. CIT, (1983) 144 ITR
851, approving Madho Prasad, Pilibhit v. Commissioner of Income Tax,
C (1978) 112 ITR 492, and the High Court of Madras in CIT, Tamil Nadu-I v. S.
Balasubramanium, (1984) 147 ITR 732, and in Commissioner of Income-Tax
v. Shri Manakram, (1990) 183 ITR 382 (MP), took the view that the term is
used in the said provision in the wider sense. But a contrary view is taken
by the High Courts of Andhra Pradesh in Commissioner of Income Tax v.
San/ca Sankaraiah, (1978) 113 ITR 313, Gujarat in Dinubhai Ishvarlal Patel
D v. K.D. Dixit, (1979) 118 ITR 122, Punjab & Haryana in C/Tv. Anand Sarup
(1980) 121ITR873, Delhi in Prayag Dass Rajgarhia v. CIT, (1982) 138 ITR
291 and Full Bench of Kamataka High Court in Arunachalam v. CIT, (1985)
151ITR172.

Here, it is necessary to bear in mind the distinction between the rights
E and obligations of partners of the partnership firm and coparceners of Hindu
Undivided Family.

In Commissioner ofIncome Tax, Madras v. Bagyfllakshmi & Co., (1965)
55 ITR 660, this Court observed :

F "A partnership is a creature of contract. Under Hindu law a joint
family is one of status and right to partition is one of its
incidents ...:.....Except where there is a specific provision of the Income-
tax Act which derogates from any other statutory law or personal law,
the provision will have to be considered in the light of the relevant
branches of law. A contract of partnership has no concern with the
G obligation of the partners to others in respect·oftheir shares of profit
in the partnership. It only regulates the rights and liabilities of the
partners. A partner may be the Karta of a joint Hindu family; h.e may
be a trustee; he may enter into a sub-partnership with others; he may,
under an agreement, express or implied, be the representative of a
H group of persons; he may be a benamidar for another. In all such
' C.l.T. v. OM PRAKASH [S.S.M. QUADRI, J.]

cases he occupies a dual position. Qua the partnership, he functions A
in his personal capacity; qua the third parties, in his representativ~
, capacity."

We are in respectful agreement with the aforesaid observations.

When a Karta of the Hindu Undivided Family is a partner in a partnership B
finn, he has dual capacity; qua the partnership, he functions in his personal
capacity and qua third parties, in his representative capacity. Under the
Income Tax Act, when he is assessed in respect of the income derived by him
from the partnership firm as a partner, it is in his representative capacity as
Karta of}he Hindu Undivided Family and not as an individual as such. That C
is beoau~e his capacity vis-a-vis spouse/minor children who are members of
the Hindu Undivided Family is that of Karta and not as individual though v!s-
a-vis other partners of the partnership finn he functions in his personal
, capacity. This being the position, the income of a Karta's spouse/minor child
cannot be included in computation of his total income for that is the income
of Hindu Undi/J«Ied Family and not his individual income. Section 64 will be D
attraciUd only when an assessee's own income is being assessed and not that
of an Hindu Undivided Family. If a Karta is brought within the ambit of
'individual' in Section 64(1), the share income of the spouse of the Karta and
- his minor children will, in effect, be included in the income of the Hindu
Undivided Family which is not what is contemplated by Sections 64(1) (i) and E
(ii) and which, with respect we say, has rightly been held to be impennissible
by this Court in l. Hirday Narain v. Income-Tax Officer, A Ward, Bareilly,
(I 970) 78 ITR 26, Commissioner ofIncome-Tax v. Harbhajan Lal, (1993) 204
ITR 361 and Commissioner of Income-Tax v. Jayantilal Prem Chand Shah,
(1995) 211 ITR 111.
F
In a Hindu Undivided Family which consists of a Karta, his sons, their
wives and minor grand children, if along with the Karta the spouse of a son
and their minor children are admitted to the benefits of the partnership or are
partners of the partnership firm, obviously, their share income from the firm
could not be added in computing the total income of the Karta as in such a G
case Section 64(1) will not be attracted. But if the Karta's spouse and minor
children are admitted to the benefits of the partnership or are joined as
partners of the partnership firm, their share income from the firm will have to
be added up in the income of the Karta. Obviously, the expression cannot be
so interpreted to yield such inequitable and. inconsistent result which could
not have been contemplated by the Parliament. H
1196 SUPREME COURT REPORTS (1999] 3 S.C.R.

A It will be pertinent to note here that under Section 4 of the 1961 Act, ...._
the charging section, the total income of the previous year or years of every
person is charged for any assessment year at the rate or rates prescribed by
the Finance Act. We may notice here the definition of the term 'person' which
is defined in Section 2(31) of the 1961 Act, and reads as under :
B "2(31) "person"· includes -
(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
C (iv) a finn,
(v) an association of persons or a body of individuals, whether
incorporated or not,
(vi) a local authority, and
(vii) every artificial judicial person, not falling within any of the
D preceding sub- clauses."

A plain reading of the definition, extracted above, shows that both 'an
individual' and 'a Hindu Undivided Family' are inter alia constituents of the

E
meaning of the term 'person'. The expression 'any individual' is narrower
than the terms 'person' and 'assessee' defined in Section 2(7); an individual
is a person but every person need not be an individual. So also an individual
-
may be an assessee but every assessee need not be an 'individual'. Had the
Parliament intended to give wider meaning to the word 'individual' in Sections
64(l)(i) and (ii) so as to include the Karta of a Hindu Undivided Family it
would have drafted the provision differently. It is thus clear that 'individual'
F in Section 64(1) does not take in Karta of the Hindu Undivided Family within
its import.

Yet another aspect which militates against bringing in Karta within the
meaning of the term 'individual' in Section 64(1) is that it speaks of total
income of any individual and total income of the Hindu Undivided Family
..
G need not be total income of Karta as an individual.

The object of Section 64( 1) of the 1961 Act, like the object of Section
16(3) of the 1922 Act, is to check the tax evasion resorted to by individuals
forming partnership as a cloak to perpetrate fraud on taxation. But cases of
genuine partnership where any individual takes the spouse and minor children
H as partners will also be within the clutches of Section 64( 1), a fact adverted
C.l.T. v. OM PRAKASH (S.S.M. QUADRI, J.J 1197

- I

to by Balaji's case (supra). It is true that ifKarta is held not to fall within the
meaning of the term 'individual' in Section 64(1), the tax evasions sought to
be averted would continue in the case of the Hindu Undivided Family where
A

a Karta takes the spouse or minor children to the benefits of the partnership
or as members in the partnership firm. But it cannot be lost sight of that
'individual' and Hindu Undivided Family are two different tax entities and B
Parliament has chosen to confine the application of Section 64(1) for purposes
of tax evasion in regard to individuals without being Kartas of the Hindu
Undivided .Family in the fold of section either by defining individual or
otherwise. On the ground that Karta of a Hindu Undivided Family will draw
an unfair advantage of this interpretation, we cannot enlarge the meaning of
the term 'individual' by the process of interpretation so as to rope in Karta C
within the meaning of the term 'individual' and by implication, the Hindu
Undivided Family within the clutches of Section 64(1) of the 1961 Act.

From the above discussion, it follows that income in the hands of Karta
of the Hindu Undivided Family as p!!rtner of a partnership firm cannot be
treated as income of individual and, if that be so,\ the income arising to the D
spouse or minor child of the Karta of the Hindu Undivided Family cannot be
included in his income as such under Sections 64(1)(i) and (ii) of the 1961 Act.

For the above reasons, we are inclined to take the view that the
expressions 'any individual' and 'such individual' in Sections 64(1)(i) and (ii)
are employed in restricted sense and do not include a Karta of a Hindu E
Undivided Family. Accordingly, we approve the judgments of the High Courts
of Andhra Pradesh, Gujarat, Punjab & Haryana, Delhi, Kerala, Rajasthan and
Kamataka and overrule the judgments of the High Courts of Allahabad,
Madras, Madhya Pradesh and Orissa taking a contrary view.

In the light of the above discussion, we answer the question, referred
F
to above, in the affirmative, in favour of the Assessee and against the
Revenue .
• In the result, Civil Appeals Nos. 4234/83, 2979-81/89, 10629- 10631/95,
2900/80, 2287/80, 2335-41(NT)/91, 968-970(NT)/91, 1222(NT)/87, 1222-23/86, G
11553-11554/95, 1217-19/86, 37/88, 2435-39(NT)/95 and C.A. No.......J99@S.L.P.
(C) No. 1608/80 filed by the Revenue against the orders of the High Courts
are dismissed; in Civil Appeals Nos.309- 311 (NT)/85, 654-55(NT)/85 and 650-
652(NT)/87, filed by the assessees, the orders of the Madras High Court are
set aside, the questions referred to are answered in the affirmative, i.e., in
favour of assessees and against the Revenue and the appeals are allowed. H
1198
'
[1999] 3 S.C.R.
'
-
SUPREME COURT REPORTS

A T.R.C. No.1183 is allowed. We shall take it that the following question ...
is referred to us:

"Whether, the Appellate Tribunal was justified and in law correct in
holding that the share income determined by the assessee's wife from
Mis. Madurai Mahalakshmi Agencies, cannot be included under Section
B 64 of the Income-tax Act, 1961 in the total income of the assessee who
is assessed in the status of an individual?"
and we answer the question in the affirmative in favour of the assessee and
against the Revenue.

c There shall be no order as to costs.

v.s.s. Appeals dismissed.
allowed and T.P.C. No. 1/83 Allowed.

••