2000 (6) TMI 798 - AT - Income Tax

Summary

Issues:
1. Applicability of section 50 of the Income-tax Act to the assessment year 1994-95.
2. Clubbing of minor children's income in the hands of the assessee under section 64(1A) of the Income-tax Act.

Issue 1: Applicability of section 50 of the Income-tax Act:
The appeal pertains to the assessment year 1994-95 where the Assessing Officer applied section 50 of the Income-tax Act to the assessee's case. The deceased husband of the assessee carried on businesses from Gala Nos. 4 and 10A, which were later sold. The Assessing Officer determined the cost of assets based on the provisions of section 50(1)(ii) and disallowed indexation benefits. The Assessing Officer concluded that the cost of assets should be based on the WDV at the beginning of the previous year. The assessee contested this, arguing that section 50 presupposes the existence of a block of assets, which was no longer the case after the husband's death and subsequent legal proceedings. The Tribunal agreed with the assessee, stating that the assets were inherited and ceased to be part of the block of assets after 1989. Therefore, the assessee was entitled to the benefit of the index cost method for determining the acquisition cost of the properties.

Issue 2: Clubbing of minor children's income:
The second issue revolved around whether the income of the assessee's minor sons should be clubbed in her hands under section 64(1A) of the Income-tax Act. The Revenue argued that since the assessee maintained her children after her husband's death, their income should be clubbed with hers. The assessee contended that she did not maintain her children as they had separate income sources. The Tribunal analyzed the situation and referred to the relevant Explanation in section 64(1A) of the Act. It was determined that even after the husband's death, the marriage subsisted, and therefore, Explanation (a) applied, requiring the minor children's income to be included in the assessee's total income. As the assessee's income was greater, the Tribunal upheld the decision to club the minor children's income with hers.

In conclusion, the Tribunal partially allowed the appeal, ruling in favor of the assessee regarding the applicability of section 50 of the Income-tax Act and the clubbing of minor children's income.