1993 (3) TMI 73 - HC - Income Tax

Summary

Issues:
- Interpretation of section 64(1)(iii) of the Income-tax Act, 1961 regarding inclusion of minor child's income in the total income of the father.
- Whether the minor child's share income can be included in the father's income if the father is a partner in a representative capacity as a "karta" of a Hindu undivided family.
- Conflict between different High Court judgments on the application of section 64(1)(iii).

Analysis:
The case involved a dispute regarding the inclusion of the share income of minor sons in the total income of the father under section 64(1)(iii) of the Income-tax Act, 1961. The Income-tax Officer had sought to tax the share income of the minor sons in the hands of the father on a protective basis. The Appellate Assistant Commissioner deleted the addition, leading to an appeal by the Income-tax Officer before the Income-tax Appellate Tribunal.

The Tribunal held that the term "individual" in section 64(1)(iii) refers to a human being capable of having a wife or minor child, excluding groups or corporations. The Tribunal dismissed the appeal, emphasizing the restrictive interpretation of the term "individual." The Tribunal also considered the applicability of section 64(1)(vi) due to gifts received by the minors from their grandparents.

The court discussed conflicting judgments from various High Courts on the issue. Some High Courts held that if the father is a partner in a representative capacity as a "karta" of a Hindu undivided family, the minor child's share income cannot be included in the father's individual income. However, the court referred to its previous decisions in CIT v. Abhay Kumar and CIT v. Bal Mukund, emphasizing that section 64(1)(iii) applies only when the father is assessed as an individual and not as a karta of the Hindu undivided family.

Considering the interpretation beneficial to the assessee and the consistency of its previous decisions, the court upheld the Tribunal's decision to delete the share income of the minor sons from the father's assessment under section 64(1)(iii). The court ruled in favor of the assessee, citing the lack of grounds to refer the matter to a larger bench and awarded no costs.

In conclusion, the court's judgment clarified the application of section 64(1)(iii) in cases where the father is a partner in a representative capacity as a "karta" of a Hindu undivided family, providing a significant interpretation in favor of the assessee based on previous decisions and the overall benefit principle.