1992 (1) TMI 69 - HC - Income Tax

Summary

Issues:
Whether the share income of minors can be assessed under section 64(1)(iii) of the Income-tax Act in the hands of the assessee, the legal representative of the minors, when the legal representative did not have his income.

Analysis:
The case involved a reference by the Tribunal under section 256(1) of the Income-tax Act, seeking the High Court's opinion on the assessment of share income of minors in the hands of the assessee. The assessee's two minor sons were admitted to a partnership firm, and their income was assessed in the hands of the assessee under section 64(1)(iii) of the Act, even though the assessee had no income of his own during the relevant assessment year.

The Appellate Assistant Commissioner upheld the assessment, leading the assessee to appeal to the Tribunal. The Tribunal set aside the assessment order, stating that since the income-tax authorities did not establish the minors as benamidars of the assessee, the minors' income could not be assessed in his hands.

The Department argued that the Tribunal erred in setting aside the assessment orders, as they were made based on the statutory fiction under section 64(1)(iii) of the Act, not on the grounds of benami income. The relevant provision stated that the income of a minor child from a partnership firm would be included in the parent's income, irrespective of the parent having their income, as per the legal fiction created by the Legislature.

The High Court noted that the legal fiction under section 64(1)(iii) deems the minor's income from a partnership firm as the parent's income, regardless of the parent's income status. Citing precedents, the Court emphasized that the parent's income inclusion is based on the statutory provision, not on the parent being a benamidar. Therefore, the Court answered the question in favor of the Department, upholding the assessment of minors' income in the assessee's hands.

Justice S. K. Chattopadhyaya agreed with the judgment, and no costs were awarded. The order was to be transmitted to the Assistant Registrar of the Tribunal, Patna Bench.