Satish Chandra, C.J:— Sahu Madho Prasad and Sahu Govind Prasad were brothers. Each of them was assessed under the I.T Act in an individual status. They were kartas of their own HUF, and those HUFs were also assessed. The two brothers, to wit, Sahu Madho Prasad and Sahu Govind Prasad, were partners in a firm called Arvind Cold Storage. The minor sons of each of the two brothers had been admitted to the benefits of this partnership firm.
2. For the assessment years 1967-68 to 1969-70 the share income of the minor sons from the firm, Arvind Cold Storage, was included in the income of their respective fathers while computing the total income of the fathers in their assessment in the status of an individual. The assessee (Madho Prasad) felt aggrieved, and took the matter up, but failed. He came to this court. This court held that under s. 64(1) of the I.T Act, 1961, the share income of the minor son was liable to be clubbed with the income of the father in his individual assessment, irrespective of the fact whether the father of the minor was partner in a firm in his personal capacity or in his representative capacity as the karta of the joint family. The addition of the minor's share in the father's individual income was upheld. The judgment of this court is reported in Madho Prasad, Pilibhit v. Commissioner Of Income-Tax, U.P, [1978] 112 ITR 492.
3. The same problem arose in the case of the other brother, Sahu Govind Prasad, for the assessment year 1972-73 (previous year ending on 31st March, 1972). The revenue authorities clubbed the firm's share income of the minor sons of Govind Prasad in the latter's individual assessment. The share income of Govind Prasad in the firm, Arvind Cold Storage, was assessed in the hands of the HUF of which Govind Prasad was the karta. This share income of Govind Prasad was not included while computing his total income in his individual status. A perusal of the assessment order of Sahu Govind Prasad as an individual shows that his total income from the various sources was assessed at Rs. 50,475. This figure did not include the share income of Govind Prasad from the firm, Arvind Cold Storage, either for purposes of assessment, or even for rate purposes. The assessment order then proceeds to state:
“The assessee's two minor sons Shri Sidharth Pd. and Shri Rahul Pd. are partners of 12.5% in M/s. Arvind Cold Storage, Lucknow, and their determined share of profit is Rs. 5,142 each. Since Shri Govind Prasad father is also a partner in that firm the share of profit of the minor sons is assessed in the hands of the assessee. Thus, Rs. 10,284 will be added back.
Total income from all sources thus comes to Rs. 60,759.”
4. The assessee (Govind Prasad) applied for a reference to the High Court. He invited the attention of the Income-tax Appellate Tribunal to the decision of the Andhra Pradesh High Court in CIT v. Sanka Sankaraiah, [1978] 113 ITR 313. In that decision the Andhra Pradesh High Court differed from the view taken by the Allahabad High Court. Accordingly, the Tribunal felt that the question was an important one, and referred the following question of law for the opinion of this court:
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the share income of Sidhartha Prasad and Rahul Prasad, the minor sons of the assessee, from the firm, M/s. Arvind Cold Storage, had been rightly included under section 64(ii) of the Income-tax Act, 1961, as the income of the assessee.”
5. The reference came up for hearing before a Division Bench of this court on April 1, 1982. By this time the decision of this court in Madho Prasad, Pilibhit v. Commissioner Of Income-Tax, U.P, [1978] 112 ITR 492, had been dissented from by the Gujarat High Court in Dinubhai Ishvarlal Patel v. K.D Dixit, ITO, [1979] 118 ITR 122, and the Punjab & Haryana High Court in CIT v. Anand Sarup, [1980] 121 ITR 873. The Bench also noticed that the Supreme Court had dismissed the special leave petition by the Revenue against the decision of the Andhra Pradesh High Court in the case of Sanka Sankaraiah, [1978] 113 ITR 313. The Bench felt that under the circumstances the decision in Madho Prasad, [1978] 112 ITR 492 may need reconsideration. They hence referred the reference to a larger Bench for decision. That is how the matter has come before this Full Bench. The substantial question of law which falls for decision in this reference is whether the word “individual” occurring in s. 64(ii) of the I.T Act, 1961, includes the karta of an HUF, so that the income of his minor sons which arises out of the benefits of partnership in a firm in which their father is a partner in his capacity as the karta of the HUF, could be included in computing the total income of the father in his assessment in the status of an individual. The question arises with reference to s. 64 of the I.T Act, 1961, as it stood prior to its amendment, by the Taxation Laws (Amendment) Act, 1975, (which came into force from 1st April, 1976).
6. The legislative history of this provision is that the Income-tax Enquiry Report, 1936, mentioned that there were innumerable cases where husbands and fathers provided shares for their wives and minor sons and thus evaded payment of income-tax with regard to their shares in the profits of partnerships. They made suggestions for aggregation of such share income of wife or minor children with that of their husband—father. The Legislature considered this report and by the Indian I.T (Amendment) Act (No. 4 of 1937) introduced s. 16(3) in the Indian I.T Act of 1922. Its material part provided.
“16(3) In computing the total income of any individual for the purpose of assessment, there shall be included—
(a) so much of the income of a wife or minor child of such individual as arises directly or indirectly—
(i) from the membership of the wife in a firm of which her husband is a partner;
(ii) from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner.”
7. The term “individual” occurring in this provision came up for consideration before this court in Chanda Devi v. CIT, [1950] 18 ITR 944. A Bench (Malik C.J and V. Bhargava J.) held that the word “individual” in this provision included a male as well as a female human being. This decision of our High Court was followed in this court in Musta Quima Begum, In re, [1953] 23 ITR 345. Chanda Devi's case, [1950] 18 ITR 944 (All) was also followed by the High Court of Punjab in Damayanti Sahni, [1953] 23 ITR 41. In Sahodradevi N., Daga v. CIT, [1955] 27 ITR 9 (Nagpur), the Madhya Pradesh High Court took a different view. It held that the word “individual” as used in s. 16(3) of the Act was restricted to the male of the species and did not include a female.
8. The decisions of the Punjab High Court in Damayanti Sahni's case, [1953] 23 ITR 41 and of the Madhya Pradesh High Court in CIT v. Sahodra Devi's case, [1955] 27 ITR 9, were taken up in appeal to the Supreme Court ([1957] 32 ITR 615). It held that in the context of s. 16(3) the word “individual” does not include a juristic person or a group or an association of persons. It is confined to the human species, because they alone can have a wife or children. The majority further held that it was restricted in its connotation to the male of the species and did not include the female of the species. The result was that in computing the total income of the mother, the income of her minor child arising from the admission of the minor to the benefits of a partnership firm in which the mother was a partner, could not be included under s. 16(3)(ii).
9. Section 64 of the I.T Act, 1961, was the successor of s. 16(3). It provided:
“64. 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 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 parent an opportunity of being heard, that it is necessary so to do.”
10. In s. 16(3)(a)(i) the word “wife” had been used. In s. 64 it was substituted by the word “spouse”. The Explanation made the position clearer. It is thus evident that the Legislature did not adopt the view of the Supreme Court in Sodra Devi's case, [1957] 32 ITR 615, that the word “individual” meant only the male of the human species. It meant a spouse or parent which may be either a male or female.
11. This section requires that—
(1) there should be a partnership firm carrying on business;
(2) the spouse and/or minor child of an individual should be a partner or admitted to the benefits of the partnership firm;
(3) Such individual should also be a partner of that firm.
12. If these factors co-exist, s. 64 operates. Under it, the share income of the spouse and/or the minors from such firm is included while computing the total income of the individual.
13. The question is, what does the phrase “in which such individual is a partner” occurring at the end of the two clauses of s. 64 mean? Does it cover a karta if he is a partner as such, or is it restricted to one who is a partner in his own right, i.e, purely in his personal capacity?
14. A human being can be a spouse or parent. He can at the same time be the guardian of the minor children or the karta of his HUF, etc. He can be all or any of these: and, in addition, be a partner in a firm in which his spouse or minor children are also partners.
15. Take the case of a karta of an HUF. He may as such be a partner in a firm. As karta he represents the members of the family. But, “it is well-settled that when the karta of a joint Hindu family enters into a partnership with strangers, the members of the family do not ipso facto become partners in that firm” —Firm Bagat Ram Mohanlal v. CEPT, [1956] 29 ITR 521 (SC).
16. When the wife or minor children of the karta become partners in a firm, they are not there as members of the HUF. They function as partners independently.
17. What is the position of the karta when he becomes a partner in a firm? This aspect was considered by the Supreme Court in CIT v. Bagyalakshmi & Co., [1965] 55 ITR 660. It was held (p. 664):
“A partner may be the karta of a joint Hindu family; he 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 group of persons; he may be a benamidar for another. In all such cases he occupies a dual position. Qua the partnership, he functions in his personal capacity; qua the third parties, in his representative capacity.”
18. 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 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 him as his wife or minor children. To repeat, s. 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, guardian or trustee or benamidar, etc., is immaterial.
19. 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 s. 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 which is assessable in his 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 s. 64.
20. In our opinion, the phrase “in which such individual is a partner” occurring in s. 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.
21. The Andhra Pradesh High Court in Sanka Sankaraiah's case, [1978] 113 ITR 313, differed from this court. It held (p. 318):
“The expression ‘individual’ only takes in a person in his individual capacity and does not take in the karta of a Hindu joint family or a trustee or one who acts as a representative of others.”
22. S. Obul Reddy C.J observed (p. 317):
“Sankaraiah has been found to be a partner of the firm as ‘karta’ of the joint family and the income derived from the firm was included in computing the total income of the Hindu undivided family. How can that income from the firm once again be included in computing the total income of Sankaraiah as an individual, as if realised in his individual capacity from the membership of the firm of which his wife and minor child were also partners along with him. It is not the case of the Revenue that Sankaraiah was a partner of that firm in his individual capacity.”
(Emphasis* supplied)
23. As shown above, s. 64 does not operate to include the share income of the karta while computing his total income as an individual. With great respect, the underlined portion in the passage quoted above is based on a misinterpretation of s. 64. Further, the last sentence shows that it was not the case of the Revenue that Sankaraiah was a partner in that firm in his individual capacity. That makes the case distinguishable. Here the crux of the case of the Revenue is that the karta of an HUF, when he becomes a partner of a firm, he does so as an individual. In the next place, their Lordships of the Andhra Pradesh High Court have, we believe, inadvertently, misread the observations of the Supreme Court in Bagyalakshmi's case, [1965] 55 ITR 660. Their Lordships observed at page 318 of 113 ITR:
“As stated by the Supreme Court in Commissioner of Income-tax v. Bagyalakshmi & Co., [1965] 55 ITR 660, in all such cases he occupies a dual position. Qua the partnership, he functions in his individual capacity, qua the third parties, in his representative capacity.”
24. The Supreme Court did not use the word “individual” capacity. They observed that qua the partnership he functions in his personal capacity. Perhaps the Andhra Pradesh High Court felt that there was some difference between individual capacity on the one hand, and representative capacity on the other. This is also a distinguishing feature of this decision.
25. This decision of the Andhra Pradesh High Court was taken up by the CIT to the Supreme Court in Special Leave Petition (Civil) No. 2652 of 1979. A photostat copy of the order of the Supreme Court furnished to us shows that the Special Leave Petition was accompanied by an application for exemption from filing certified copy of the impugned judgment. The Supreme Court dismissed the Special Leave Petition. No reasons are mentioned. May be, the case was dismissed for lack of a copy of the judgment. Special leave is a discretionary jurisdiction of the Supreme Court.
26. It cannot be predicated that by dismissing the Special Leave Petition the Supreme Court affirmed the decision of the Andhra Pradesh High Court on its merits.
27. The Gujarat High Court has agreed with the view of the Andhra Pradesh High Court in Dinubhai Ishvarlal Patel, [1979] 118 ITR 122. Divan C.J observed (p. 130):
“It is, therefore, clear that so far as a partner is concerned, qua his partners he is an individual and qua them he functions in his personal capacity. However, when it comes to a person who represents an HUF in the affairs of a partnership firm qua the members of the HUF he is in his representative capacity. He represents them so far as outsiders are concerned, but qua them, he is merely their representative. If he is a representative, he is not an individual person.”
28. The learned Chief Justice went on to observe:
“It can be said that it is just by a chance that the karta was a person whose spouse is also a partner in the partnership firm in which he represents the HUF or the minor child of that karta who represents the HUF in the partnership happens to be admitted to the benefits of the partnership or the spouse happens to be a partner. In neither case, qua the wife or qua the minor child, is he any one else than a representative.”
29. In our view the position is the opposite. A karta of an HUF has a dual position. Qua the partnership he functions in his personal capacity; qua the third parties in his representative capacity. But in either case he is an individual. We are unable to agree that if he is a representative, he is not an individual person. He remains an individual, though the income which he earns in the representative capacity is taxable in the hands of the HUF or the group or association of persons whom he represents. But he is also assessable in his individual status. So a karta may be a representative, but he does not lose his individuality: he continues to remain an individual also.
30. When a karta becomes a partner with strangers, the junior members of the HUF do not ipso facto become partners. The minor children of the individual may be members of his HUF, but as such members they cannot be partners in the firm. Hence the karta partner, who is an individual, cannot be treated to function as a representative of the wife or minor child, in respect of their income as partners in that firm. With respect, we are unable to agree with this decision.
31. The Punjab and Haryana High Court in CIT v. Anand Sarup, [1980] 121 ITR 873, has accepted the view of the Gujarat High Court and the Andhra Pradesh High Court. It held (p. 879):
“In cases under s. 64(1)(i) and (ii), the income of the spouse or a minor child of such individual is to be clubbed with the income of the assessee only if he is a partner as an individual in a firm. If such an ‘individual’ represents an HUF as its karta and the income in his hands goes to the HUF then for the purposes of s. 64(1)(i) and (ii), it cannot be held that it is the income of an individual.”
32. So far there is no quarrel. But then their Lordships went on to hold:
“If the contention of the Revenue is correct, then there can be no income from the partnership to the HUF whose karta as such is the partner thereof.”
33. With respect, we are unable to agree with this observation. As mentioned above, s. 64 does not catch the income which is assessable in the hands of the HUF. It confines itself to the case of an individual assessee. It seeks to add the income of the spouse or minor child in the computation of the individual's assessment. It is not necessarily confined to the share income of the individual from the partnership firm. If the share income of the individual from the partnership firm is liable to be included while computing such individual's total income, it may be so included. That will be when the individual is a partner in his personal capacity. But if he is a partner in a representative capacity, with the result that the entire income that he gets as his share from the firm is assessed in the hands of the entity which he represents, then that share income is outside the purview of s. 64. None the less, the share income of the spouse or the minor children from that firm is liable to be included while computing the total income of such individual in his assessment in the status of an individual.
34. For the same reasons we are unable to agree with the decision of the Delhi High Court in Prayag Dass Rajgarhia v. CIT, [1982] 138 ITR 291. The question of law referred by the Tribunal for the opinion of this court has been referred to this Full Bench. The question was:
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the share income of Sidhartha Prasad and Rahul Prasad, the minor sons of the assessee, from the firm, M/s. Arvind Cold Storage, had been rightly included under section 64(ii) of the Income-tax Act, 1961, as the income of the assessee.”
35. Our answer to this question is in the affirmative, in favour of the Revenue and against the assessee.
36. The Commissioner is entitled to costs, which are assessed at Rs. 200.