1987 (1) TMI 19 - HC - Income Tax

Summary

Issues:
1. Whether the share income of the assessee from the firm was to be shared by three persons, including the assessee and her two minor sons.

Analysis:
The judgment concerned the assessment year 1974-75 and revolved around the share income of the assessee from a firm where her late husband was a partner. After his demise, the assessee, along with her three sons and daughter, became partners in the reconstituted firm. The partnership deed specified the devolution of the deceased husband's share to his legal heirs. The assessee initially claimed only 1/3rd of the income as her share, asserting an overriding title in favor of her minor sons. However, the Income-tax Officer assessed the entire share income in the assessee's hands.

On appeal, the Appellate Assistant Commissioner recognized a diversion of income by overriding title. The matter reached the Income-tax Appellate Tribunal, which found that the minor sons had a right to claim a portion of the share income received by the assessee from the firm. Citing the Hindu Succession Act, the Tribunal concluded that the income was not solely that of the assessee but also belonged to her minor sons. Consequently, the Tribunal dismissed the appeal against the Appellate Assistant Commissioner's order.

The judgment referred to various legal precedents, including Supreme Court cases, to establish the principle of income diversion by overriding title. It highlighted cases where income was considered to be shared with other parties due to legal obligations or agreements. Drawing parallels with these precedents, the court emphasized that the assessee's minor sons had a legal entitlement to a portion of the share income received by the assessee from the firm. This entitlement created an overriding title, obligating the assessee to share the income with her minor sons.

In line with the legal principles established in previous judgments, particularly the Supreme Court's decision in Murlidhar Himatsingka's case and the Bombay High Court's ruling in Kanoria's case, the court answered the reference question affirmatively in favor of the assessee. The judgment underscored the existence of an overriding title in favor of the minor sons, leading to the conclusion that the share income was not solely attributable to the assessee but also to her minor sons.