9911796707
|
Home
Issues Involved:
1. Liability of the father to pay tax on the income of his minor son. 2. Interpretation of Section 16(3) of the Income-tax Act. 3. Determination of income arising directly or indirectly from the admission of a minor to the benefits of a partnership. 4. Rights and liabilities of a minor admitted to the benefits of a partnership upon attaining majority. Issue-wise Detailed Analysis: 1. Liability of the Father to Pay Tax on the Income of His Minor Son: The primary issue in this case is whether the father, Bhogilal, is liable to pay tax on the income of his minor son, Arvind, under Section 16(3) of the Income-tax Act. The court noted that the income in question is not Bhogilal's own income but Arvind's, and by virtue of Section 16(3), this income is deemed to be the father's income for tax purposes. However, the court emphasized that for the income to be taxed in the hands of the father, it must first be established as the minor's income during the relevant accounting year. 2. Interpretation of Section 16(3) of the Income-tax Act: Section 16(3) stipulates that in computing the total income of an individual, the income of a minor child arising directly or indirectly from the admission to the benefits of a partnership in which the individual is a partner must be included. The court highlighted that the conditions for this inclusion are: (a) the individual must be a partner in a firm, (b) the minor must be admitted to the benefits of the partnership, and (c) the income must arise from this admission. 3. Determination of Income Arising Directly or Indirectly from the Admission of a Minor to the Benefits of a Partnership: The court examined whether the sum of Rs. 2,49,459, attributed to Arvind for the period when he was a minor, constituted income arising from his admission to the partnership's benefits. The court considered two views: one suggesting apportionment of income between the period when Arvind was a minor and after he attained majority, and the other, supported by the Supreme Court's decision, asserting that income must be a right to receive in the year of account. The court concluded that Arvind did not have a right to receive this income during the year of account, as his right to profits could only be ascertained at the end of the partnership's financial year. 4. Rights and Liabilities of a Minor Admitted to the Benefits of a Partnership upon Attaining Majority: The court analyzed the legal position of a minor admitted to the benefits of a partnership under Section 30 of the Partnership Act. Upon attaining majority, a minor has the option to continue as a partner or retire. If the minor elects to continue, the partnership does not dissolve, and the minor's rights and liabilities continue as before. If the minor opts out, they are entitled to their share as computed at the date of election. In this case, Arvind elected to continue as a partner, so his right to profits would only be determined at the end of the financial year, not on the date he attained majority. Conclusion: The court concluded that the sum of Rs. 2,49,459 could not be considered Arvind's income as a minor because he did not have a right to receive this amount during the year of account. The court emphasized that the Department's attempt to tax this amount based on a fiction that it was Arvind's income was incorrect. Consequently, the Tribunal's decision to include this amount in Bhogilal's total income was erroneous. The court answered the reference in the negative and ordered the Commissioner to pay the costs. Judgment: The court answered the question submitted in the negative, ruling that the sum of Rs. 2,49,459 could not be included in the assessee's total income for Samvat Year 2006. The Commissioner was ordered to pay the costs.
|
