1978 (2) TMI 51 - HC - Income Tax

Summary

Issues:
1. Inclusion of minor children's share income in the total income of the assessee under section 64(ii) of the Income Tax Act, 1961.
2. Justification of upholding inclusion of minor children's share incomes in the total income of the assessee under section 64(ii) of the Income Tax Act, 1961 by the Appellate Authority.

Analysis:
The judgment pertains to two references involving identical issues raised by the assessees. The assessees, widows of a deceased proprietor of a firm, had minor children who were admitted to the benefits of partnership in the firm after the father's demise. The Income Tax Officer (ITO) included the minor children's share income in the assessee's total income under section 64(ii) of the Income Tax Act, 1961. The assessees contended that section 161(1) should apply, not section 64(ii), as argued by their counsel.

The court examined the provisions of the Partnership Act and the Income Tax Act to determine the appropriate section for assessing the minor children's income. Section 30 of the Partnership Act allows minors to be admitted to the benefits of partnership with consent, which was the case for the minors in question. The court compared section 64(ii) and section 161 of the Income Tax Act, highlighting that they operate in different contexts. Section 64(ii) specifically deals with the income of minor children admitted to partnership, while section 161 addresses the liability of a representative assessee in general.

The court referred to previous judgments, including those of the Supreme Court and High Courts, to support its interpretation. It emphasized the legislative intent behind section 64(ii) to prevent tax evasion through partnerships with family members. The court held that the minor children's income from the partnership should be included in the assessee's income under section 64(ii) once they were admitted to the benefits of partnership.

Consequently, the court answered the referred questions in favor of the revenue authorities, affirming the inclusion of minor children's share income in the assessee's total income under section 64(ii) of the Income Tax Act, 1961. The court also rejected an oral application for leave to appeal to the Supreme Court, stating that the cases were not fit for such an appeal.