An HUF can enter into a partnership through its Karta and the income derived by the Karta as such partner can be treated as the income of the HUF.

CHAKRAVARTTI, C.J.

1. WE have felt some difficulty in dealing with this reference because of the form in which the question was referred or caused to be referred and because of the meaning which was sought to be attributed to it on behalf of the assessee.

2. THE assessee is an HUF, called Kaniram Hazarimull and one Indra Chand Kejriwal is its Karta. On the 18th April, 1933, Indra Chand entered into a partnership with eight other persons for the purpose of floating and obtaining the managing agency of a proposed mill to be called the Shankar Sugar Mills Limited. Clause 4 of the deed of partnership provided that the partnership capital was to be Rs. 12,00,000 to be contributed by the partners in accordance with their shares, that it would be applied by each partner to the purchasing or getting to be purchased shares of the proposed mill according to his share specified in the deed and that one-third of the share money was to be paid within a month and the remaining two-thirds on such dates as might be decided later. Clause 7 of the deed provided that the profits of the partnership would be ascertained and distributed between the partners according to their shares on the 30th September of each year. Indra Chand's share in the partnership was one-fourth. On the 11th May, 1935, a second deed of partnership was executed which in substance confirmed the earlier partnership. By that time the mill had been established and it appears from articles 135 and 136 of the articles of association of the mill company that the firm of managing agents was to get allowances and commission at certain scales. THE partnership deed of 1935 dealt with the managing agency profits in cl. 2 and it was provided that the profits would be divided among the partners in accordance with their shares--the share of Indra Chand Kejriwal being still one-fourth. THE question in the present reference is whether the one-fourth share of the managing agency income, derived by Indra Chand Kejriwal from the partnership, was rightly included in the assessment of the HUF in its assessments for the asst. yrs. 1940-41 to 1942-43. THE IT authorities as well as the Tribunal found that Indra Chand was a partner of the managing agency firm, not in his individual capacity but as the representative of the HUF and on that footing they came to the conclusion that the income derived by Indra Chand Kejriwal really belonged to the HUF whose books also showed it as a receipt. When asked to refer the question to this Court, the Tribunal declined to do so in the view that whether or not Kejriwal was a partner in his individual capacity or as a representative of the HUF was a question of fact in which no question of law was involved. Subsequently, the assessee moved this Court under s. 66(2) of the IT Act and obtained a direction upon the Tribunal to refer to this Court the following question of law :

"Whether upon the facts and circumstances of this case the income of Indra Chand Kejriwal the Karta of the assessee, an HUF, which he derived as a partner of the partnership firm of Indra Chand Hariram formed part of the income of the said undivided Hindu family and could be assessed to tax as such ?"

In due course, the Tribunal stated a case and the reference is now before us for decision.

Mr. Gupta, who appeared on behalf of the assessee, wanted to argue the question as if it had asked whether, in law, the income of the Karta of an HUF derived by him as a member of a partnership could ever be the partnership income of the family itself. On behalf of the CIT, it was contended by Mr. Meyer that it was not open to the assessee to raise that extreme question of law as comprised in the question referred, because the controversy before the authorities below had always been on the basis that the Karta of an HUF could be a partner in a firm either in his individual capacity or as a representative of the HUF of which he was the Karta and that the only question which had been raised was, in which