1991 (11) TMI 46 - HC - Income Tax

Summary

Issues:
Interpretation of the term "child" in relation to section 64(1)(iii) of the Income-tax Act, 1961.

Analysis:
The case involved a reference under section 256(1) of the Income-tax Act regarding the inclusion of a minor step-daughter's share in the total income of the assessee. The dispute centered around whether a step-child falls under the purview of section 64(1)(iii) of the Act. The Tribunal had ruled against including the step-child's share based on the interpretation of the term "child" in section 2(15A) of the Act, which includes a step-child and an adopted child. The Revenue contended that the Tribunal erred in law by not considering this definition and emphasized the importance of following the direct terms of statutory provisions in tax matters.

The key contention was whether the definition of "child" in section 2(15A) applied to section 64(1)(iii) or if the term "parent" in Explanation 1 of section 64 referred only to natural parents. The assessee argued that the term "parent" should be limited to natural parents, citing the Goa Bench decision that definitions in one statute should not necessarily apply to another. The assessee's counsel highlighted the objective of Explanation 1 to ensure income inclusion only in the natural parent's income, especially in complex family structures.

The court analyzed the provisions and noted that the primary purpose of Explanation 1 in section 64(1) was to determine which parent's income should include the child's income. The court rejected the assessee's argument that the term "parent" excluded step-parents, emphasizing that the definition of "child" in section 2(15A) was clear and not contradictory to Explanation 1. The court held that a step-child should be considered under section 64(1)(iii) based on the explicit definition of "child" in the Act.

In conclusion, the court ruled in favor of the Revenue, stating that a step-child falls within the scope of section 64(1)(iii) of the Income-tax Act, 1961, based on the defined interpretation of "child" in section 2(15A).