2000 (1) TMI 34 - HC - Income Tax

Summary

Issues Involved:
1. Obligation of the assessee to disclose his marriage with his brother's widow under section 2(15A) of the Income-tax Act, 1961.
2. Determination of whether the minors were stepchildren of the assessee.
3. Inclusion of minors' share income under section 64 in the income of the assessee.

Detailed Analysis:

Issue 1: Obligation to Disclose Marriage
The court examined whether the assessee was required to disclose his marriage with his brother's widow in his income-tax return after the introduction of section 2(15A) of the Income-tax Act, 1961. The court noted that the definition of "child" under section 2(15A) includes a stepchild, and hence, the minors, being the children of the widow from her former marriage, became stepchildren of the assessee upon his marriage to her. The court concluded that the assessee was obliged to disclose this fact in his income-tax return, as the relationship created a fiscal liability under the Income-tax Act. The court stated, "the assessee was obliged to disclose in his income-tax return the factum of his marriage with his brother's widow."

Issue 2: Determination of Stepchildren
The court addressed whether the minors were considered stepchildren of the assessee. The court referred to the definition of "child" in section 2(15A), which includes a stepchild. The court emphasized that the dictionary meaning of "stepchild" is a child of one's spouse by a previous marriage. Thus, the minors, being the children of the widow from her previous marriage, were stepchildren of the assessee. The court stated, "the minors, Firoz and Navroz, who were the sons of Ayshabegam with whom Rahim entered into matrimony, obviously, therefore, became stepchildren of the assessee."

Issue 3: Inclusion of Minors' Share Income
The court considered whether the share income of the minors could be included in the income of the assessee under section 64 of the Income-tax Act. Section 64(1)(iii) provides that the income of a minor child from the admission to the benefits of a partnership in a firm shall be included in the income of the individual. Given that the minors were stepchildren of the assessee and were admitted to the benefits of the partnership firm, their share income was rightly included in the assessee's income. The court stated, "the share income of a stepchild could be clubbed with the income of the assessee who is a partner in the firm in which the minor or a stepchild is admitted to the benefit of the firm."

Conclusion:
The court answered all three questions in favor of the Revenue and against the assessee, affirming the obligation to disclose the marriage, recognizing the minors as stepchildren, and validating the inclusion of their share income in the assessee's income. The court concluded, "we answer question No. 1 (at the instance of the assessee) in the affirmative, against the assessee and in favour of the Revenue, whereas, question No. 2, at the instance of the Revenue, in the negative against the assessee and in favour of the Revenue and question No. 3, at the instance of Revenue, in the negative in favour of the Revenue and against the assessee." The reference was disposed of without any order as to costs.