2001 (6) TMI 176 - AT - Income Tax

Summary

Issues:
- Interpretation of provisions under section 64(1A) of the Income-tax Act, 1961 regarding clubbing of minor child's income in the hands of the assessee
- Allowance of deduction under section 80-I for each minor child's income

Analysis:

1. The case involved an appeal by the department against the order of the CIT(Appeals) related to the assessment year 1993-94. The primary issue was the interpretation of section 64(1A) of the Income-tax Act, 1961, concerning the clubbing of income of minor children in the hands of the assessee. The department contested the CIT(Appeals) directive to allow deduction of Rs.35,000 under section 80-I for each minor child separately.

2. The assessee had shown income from various sources, including the income of five minor children from interest/dividend under section 64(1A). The Assessing Officer allowed a deduction of Rs.7,000 per child under section 80-I, stating that only one deduction could be allowed after clubbing the income under section 64(1A). Additionally, a deduction of Rs.7,500 under section 10(32) was allowed.

3. The CIT(Appeals) relied on precedents from the Karnataka High Court and the Allahabad High Court to support the assessee's claim for separate deductions under section 80-I for each child. The department appealed to the Tribunal against the CIT(Appeals) decision.

4. During the appeal, the department argued that no separate deduction should be allowed for each child under section 80-I, as the income had already been clubbed under section 64(1A). The assessee's counsel referenced relevant case laws and highlighted the allowance of separate deductions in similar cases by jurisdictional High Courts.

5. The Tribunal analyzed the applicable provisions of section 64(1A) and section 10(32) of the Income-tax Act. It noted that the amendment to section 64(1A) was effective from April 1, 1993, which was relevant to the assessment year in question. The Tribunal concluded that only a deduction of Rs.1,500 per child under section 10(32) was permissible, totaling Rs.7,500. It further emphasized that only one deduction under section 80-I could be allowed to the assessee.

6. Considering the legislative intent and the specific provisions of the law, the Tribunal held that no separate deduction could be granted under section 80-I for each child. It pointed out that the assessee had previously filed separate returns for each child before the amendment to the statute. Therefore, the Tribunal reversed the CIT(Appeals) order and reinstated the Assessing Officer's decision.

7. The Tribunal distinguished the case laws cited by the assessee, emphasizing the clarity of the amended provisions applicable to the present case. It highlighted the legislative intent behind the clubbing provisions and concluded that only one deduction could be allowed, as the assessment was completed in the status of an individual.

8. Ultimately, the Tribunal allowed the department's appeal, affirming that no separate deduction under section 80-I could be granted for each minor child's income, as the income had been clubbed under section 64(1A).