- (1.) THE Tribunal by a common statement of case, at the instance of two assessees Ram Krishna Tekriwal and Indra Kumar Tekriwal, has referred the following common question of law in respect of asst. year 1977 -78 for the opinion of this Court, under S. 256(1) of the IT Act, 1961 (for short 'the Act'): "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that even if the assessee represented his HUF as partner of the firm, M/s Vijay Picture Palace, the income from share of the wife from the same firm could be included in the total income of the assessee individual?"
(2.) THE reference arises out of individual assessments of both the assessees. In the previous year relevant to the asst. year 1977 -78 both of them were partners in their representative capacity as Karta of their respective HUFs in a firm called 'Vijay Picture Palace' in which their wives were also partners. It was claimed before the ITO that since the assessees were not partners in the said firm in their individual capacity but in a representative capacity as Karta of their HUFs, the income arising to the share of their respective wives from the partnership business was not liable to be clubbed in their respective hands under S. 64(1) of the Act. The stand taken by the assessee did not find favour not only with the ITO but was rejected throughout including by the Tribunal. Feeling still aggrieved, both the assessees applied for reference under S. 256(1) of the Act to this Court and the Tribunal, as stated earlier, has referred a common question of law for the opinion of this Court. We have heard learned counsel for the parties. The question for consideration is that where an individual is partner in a firm in a representative capacity as Karta of an HUF and his wife is also a partner in that firm, whether the income earned by the spouse of such individual from the membership of the firm is liable to be clubbed in the income of such individual because of the provisions contained in S. 64(1) of the Act.
(3.) NOW cl. (i) of Sub -S. (1) of S. 64 of the Act as it stood at the material time provided that in computing the total income of any individual, there shall be included all such income as arises directly or indirectly 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. The controversy posed in the question is no longer open to debate and has been set at rest by the Supreme Court to which we shall refer shortly hereinafter.;