1957 (5) TMI 9 - SC - Income Tax

Whether on a true construction of the provisions of section 16(3)(a)(ii) of the Indian Income-tax Act, 1922, the income of the three minor sons of the assessee is liable to be included in her total income? Held that - The High Court observed that the word individual as used in section 16(3) of the Act was ambiguous and referred to the quoted passage from the Inquiry Committee s Report, 1936, as also the statement of objects and reasons and came to the conclusion that the word individual was restricted to the male of the species and it was not the intention of the Legislature to impose additional tax on a mother assessee by including in her income the income of her minor children arising from the benefits of partnership of a firm in which the mother and the minors were partners. Thus the referred question was rightly answered by them in the negative.

Issues Involved:
1. Whether the word "individual" in section 16(3)(a)(ii) of the Indian Income-tax Act, 1922, includes a female.
2. Whether the income of minor sons from a partnership in which their mother is a partner should be included in the mother's total income.

Detailed Analysis:

Issue 1: Interpretation of "Individual" in Section 16(3)(a)(ii)
The primary issue is whether the term "individual" in section 16(3)(a)(ii) of the Indian Income-tax Act, 1922, includes a female. Section 16(3) of the Act provides that in computing the total income of any individual for the purpose of assessment, there shall be included the income of a wife or minor child of such individual arising directly or indirectly from the sources specified in sub-clauses (i) to (iv).

The revenue argued that the word "individual" should be interpreted to include both males and females, thereby including the income of minor children in the total income of their mother if she is a partner in a firm. The assessees, however, contended that the word "individual" in section 16(3) should be restricted to males, as the context of the section implies a male individual who can have a wife and minor children.

The court examined the language of section 16(3), noting that the term "individual" is not defined in the Act but is generally understood to include both males and females. The court also considered the legislative intent behind the provision, which was to prevent tax evasion through nominal partnerships involving wives and minor children. The court concluded that the word "individual" in section 16(3) is ambiguous and, therefore, requires interpretation in light of the legislative intent and surrounding circumstances.

Issue 2: Inclusion of Minor Sons' Income in Mother's Total Income
The second issue is whether the income of minor sons from a partnership in which their mother is a partner should be included in the mother's total income. The Tribunal and the High Court of Punjab had differing views on this matter. The Tribunal held that the word "individual" in section 16(3)(a)(ii) referred only to males, and therefore, the income of minor sons should not be included in the mother's total income. The High Court of Punjab, however, followed the decision of the Allahabad High Court in Chanda Devi v. Commissioner of Income-tax and held that the word "individual" includes females, thereby including the income of minor sons in the mother's total income.

The Supreme Court analyzed the language of section 16(3)(a)(ii) and the legislative intent behind it. The court noted that the provision was enacted to prevent tax evasion through nominal partnerships and transfers of assets to wives and minor children. The court observed that the language of the section, particularly the use of the words "such individual" and "her husband" or "the husband," indicates that the legislature intended to include only males in the scope of the provision. The court concluded that the words "any individual" and "such individual" in section 16(3) refer only to males and do not include females.

Conclusion:
The Supreme Court held that the word "individual" in section 16(3)(a)(ii) of the Indian Income-tax Act, 1922, is restricted to males and does not include females. Consequently, the income of minor sons from a partnership in which their mother is a partner should not be included in the mother's total income.

Judgments:
- Civil Appeal No. 322 of 1955: Dismissed with costs. The referred question was answered in the negative, meaning the income of minor sons should not be included in the mother's total income.
- Civil Appeal No. 25 of 1955: Allowed with costs. The referred question was answered in the negative, aligning with the interpretation that "individual" does not include females in this context.

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