JUDGEMENT (Per Smt. Sujata V. Manohar, J.) The present application No. 144 of 1990 relates to the assessment year 1981-82. It is under section 256(2) of the Income-tax Act, 1961. The Income-tax Reference No. 62 of 1987 relates to the assessment years 1972-73, 1973-74, 1975-76 to 1977-78 and 1979-80. The Income-tax Reference No. 733 of 1987 relates to the assessment year 1978-79. The relevant facts are as follows : The assessee who is an individual was originally a partner in the firms styled as M/s. Variety Plywood and M/s. Quality Plywood, Bombay in his individual capacity. On 20.8.1970 out of his separate and self acquired funds he impressed a sum of Rs. 30,000 with the character of his HUF property. He retired from the two partnership firms with effect from 1.10.1970. On the same day he entered into these partnerships again in his capacity as the Karta of his HUF. He contributed a sum of Rs. 15,000 in each of these partnerships out of the aforesaid sum of Rs. 30,000, as his share, on behalf of the HUF, in the capital of the two firms. It has been throughout contended by the Department in the income-tax proceedings pertaining to the assessee that the income, in the form of a share of profits derived by the assessee from these two firms, should be taxed as his individual income under section 64(2)(b) of the Income-tax Act, 1961. The Tribunal has, however, held that section 64(2)(b) is not attracted in the present case. It has therefore held that the share of income of the HUF in the form of profits derived from the business of these two firms is not includible in the computation of the assessee's income. For the assessment years 1972-73, 1973-74, 1975-76, 1976-77, 1977-78 and 1979-80 (I.T. Reference No. 62 of 1987), the Tribunal has referred the following question to us under sec. 256(1) of the Income-tax Act : "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the share of profits in the firms of M/s. Variety Plywood, Bombay and M/s. Quality Plywood, Bombay, earned in the capacity of HUF of Shri Khimji Nenshi is not assessable in the hands of Shri Khimji Nenshi as individual in view of the provisions of sec. 64(2) read with sec. 64(2) read with sec. 64(1) of Income-tax Act, 1961 ?" The same question has been referred to us under sec. 256(1) of the Income-tax Act for the assessment year 1978-79 in I.T. Reference No. 733 of 1987. For the assessment year 1980-81, the Tribunal has declined to refer any question. Hence Income-tax Application No. 144 of 1990 is filed under section 256(2) of the Income-tax Act which is being heard along with these references. Sec. 64(2) as it was applicable for the assessment years upto 1975-76 was as follows : Sec. 64(2) - Where, in the case of an individual being a member of a Hindu undivided family, any property having been the separate property of the individual has, at any time ...... been converted by the individual into property belonging to the family through the act of impressing such separate properly with the character of property belonging to the family ............. then .............. for the purpose of computation of the total income of the individual : (a) xxxx xxxx xxxx (b) the income derived from the converted property or any part thereof, in so far as it is attributable to the interest of the individual in the property of the family, shall be deemed to arise to the individual and not the family. Section 64(2) was amended with effect from 1.4.1976, by deleting, inter alia, the words "in so far as it is attributable to the interest of the individual in the property of the family" from section 64(2)(b). For the assessment years 1977-78 and subsequent assessment years, therefore, the amended section 64(2)(b) was in force. On facts as found, there is no dispute that the capital contributed by the assessee to both the firms in his capacity as the Karta of the HUF is converted property as per sec. 64(2) above. The only question that arises for consideration is whether the income which the HUF has derived by way of a share of the profits of both these firms can be considered as income derived from the converted property under section 64(2)(b). In the case of Commissioner of Income-tax, West Bengal III v. Prem Bhai Parekh and ors., reported in (1970) 77 ITR 27 the Supreme Court was required to consider the provisions of sec. 16(3) of the Income-tax Act, 1922. In that case the assessee who was a partner in the firm retired from the firm. In the case of Commissioner of Income-tax, West Bengal III v. Prem Bhai Parekh and ors., reported in (1970) 77 ITR 27 the Supreme Court was required to consider the provisions of sec. 16(3) of the Income-tax Act, 1922. In that case the assessee who was a partner in the firm retired from the firm. Thereafter he gifted Rs. 75,000 to each of his four sons, three of whom were minors. The firm was thereafter reconstituted whereby the major son became a partner while the minor sons were admitted to the benefits of partnership. The amounts gifted by the assessee were given to the firm as capital contribution on behalf of the sons. The question was whether the income arising to the minors by virtue of their admission on the benefits of partnership in the firm could be included in the total income of the assessee. The Supreme Court said that the connection between the gifts made by the assessee and the income of the minors from the firm was a remote one and the income arising to the three minor sons could not be considered as income arising directly or indirectly from the transfer of assets by the assessee to the minors. The operative words of sec. 16(3)(a)(iv) were "income as arising directly or indirectly". Sec. 64(2)(b) uses the words "the income derived from the converted property". The Supreme Court in the above case said that the connection between the income derived and the transferred assets was remote. The income arose on account of the minors being admitted to the benefits of partnership. Undoubtedly, they were admitted to the benefits of partnership because of the capital contribution made by them. But, there was no nexus between the transfer of assets to them and the income in question. Hence the income did not arise directly or indirectly from the transferred assets. For the same reasons, therefore, the income also cannot be said to be derived from the assets so transferred under sec. 64(2)(b) of the Income-tax Act, 1961. The ratio of the above Supreme Court case is, therefore, directly applicable. In the case of Bhaichand Jivraj Muchhala v. Commissioner of Income-tax, reported in (1976) 102 ITR 385 our High Court was required to consider the provisions of sec. 16(3)(a)(iii) of the Income-tax Act, 1922. In the case before our High Court the assessee gifted some money to his wife. In the case of Bhaichand Jivraj Muchhala v. Commissioner of Income-tax, reported in (1976) 102 ITR 385 our High Court was required to consider the provisions of sec. 16(3)(a)(iii) of the Income-tax Act, 1922. In the case before our High Court the assessee gifted some money to his wife. She gave this money as her capital contribution in a partnership firm in which she was taken as a partner. The Court said that only the interest paid by the partnership firm on the capital so contributed would be includible in her husband's income under sec. 16(3)(a)(iii). But her share of profits from the firm cannot be so included in her husband's income. Our High Court relied upon the Supreme Court decision in the case of CIT v. Prem Bhai Parekh (77 ITR 27 (SC) above) and held that there was no nexus between the transfer of assets and the income derived by way of a share in the profits of the partnership. The same reasoning applies to the language used in sec. 64(2)(b) of the Income-tax Act, 1961 also. In order that the income can be considered as being derived from the converted property, there should be a nexus between the converted property and the income which is so derived. When such an income has no direct or indirect nexus with the converted property, it cannot be said to be derived from the converted property. Our attention was also drawn to a decision of the Kerala High Court in 135 ITR 278 (Commissioner of Income-tax v. Cochin Refineries Ltd.) where the Court said that the words "derived from" in sec. 80J cannot have a wide import so as to include an income which can in some manner be attributed to the business. There must be some direct connection between the business and the income generated. Similarly in the present case there must be a nexus between the converted property and the income received. In our view, the profits earned in business do not have such a direct connection with the capital of the partnership. Moreover, sec. 64(2)(b) contains a deeming provision and hence requires to be construed strictly. An income which is derived from the profits of the firm and not from the capital contributed as such, cannot be considered as income derived from the converted property. It was urged by Mr. Moreover, sec. 64(2)(b) contains a deeming provision and hence requires to be construed strictly. An income which is derived from the profits of the firm and not from the capital contributed as such, cannot be considered as income derived from the converted property. It was urged by Mr. Uponi that the position of an HUF in a partnership must be considered differently because an HUF cannot exert itself personally in the business of the partnership. Its right to a share in the profits is derived only because of the capital contributed by it. This reasoning is fallacious. The Karta of an HUF is a partner in the partnership firm like any other partner and may be required to discharge his obligations as a partner. Moreover, the more fact that some amount is contributed by the HUF as capital in a partnership firm does not necessarily result in profits being earned by the HUF because the partnership may still make a loss. There can, therefore, be no special case carved out for an HUF which earns a share in the profits of a partnership which would exclude it from the reasoning of the Supreme Court as well as our High Court in the cases cited above. In the premises the question which is referred to us in I.T. Reference Nos. 62/87 and 733/87 is answered in the affirmative and in favour of the assessee. In view of our decision above, no purpose can now be served by referring the same question to the Tribunal for the purpose of it being referred to us under sec. 256(2) of the Income-tax Act, 1961 for the assessment year 1981-82 as the exercise would be academic. The Income-tax Application No. 144 of 1990 is, therefore, dismissed and the rule is discharged. No order as to costs.