1973 (7) TMI 20 - HC - Income Tax

Computing the total income - father settled property for minor s benefit - the income vested in trustees and the minor was not getting any benefit in the relevant year - Whether, on the facts and in the circumstances of the case, Rs. 2,412 should have been included in the total income of the assessee in the relevant year under section 16(3)(b) of the Indian Income-tax Act, 1922 ? Held, no - it is clear that although the income was in the hands of the trustees no part of it was either actually received by the minor daughter of the assessee nor did it accrue to her nor she derived any benefit out of the income in the hands of the trustees

Summary

Issues:
Interpretation of section 16(3)(b) of the Indian Income-tax Act, 1922 regarding inclusion of income arising from assets transferred for the benefit of a minor child in the total income of the assessee.

Detailed Analysis:

The case involved a reference under section 66(1) of the Indian Income-tax Act, 1922, where the assessee, an employee of Tata & Steel Co., transferred shares and securities to a trust for the benefit of his minor daughter. The Income-tax Officer included a portion of the trust income in the assessee's total income, leading to a dispute regarding the inclusion of Rs. 2,412 in the assessment year 1960-61.

The Appellate Assistant Commissioner examined the trust deed and found that no part of the trust income should be added to the assessee's income, except for the specific amount of Rs. 2,412. The Tribunal also reviewed the trust deed and concluded that since no money had been paid to the minor daughter during the accounting year, no benefit accrued to her, supporting the decision of the Appellate Assistant Commissioner.

The Tribunal referred the question of law to the High Court, focusing on whether the amount of Rs. 2,412 should be included in the assessee's total income under section 16(3)(b) of the Act. Section 16(3)(b) deals with income arising from assets transferred for the benefit of a minor child and its inclusion in the assessee's total income.

The High Court analyzed the provisions of section 16(3)(b) in light of the Supreme Court's decision in a similar case and emphasized that for income to be included in the assessee's total income, the minor child must derive some benefit under the trust deed in the relevant accounting year. In this case, as the minor daughter did not receive any income or benefit from the trust during the accounting year, the High Court held that the amount of Rs. 2,412 could not be included in the assessee's total income.

Ultimately, the High Court decided the reference against the Commissioner of Income-tax, holding that the specific amount in question should not be included in the assessee's total income for the assessment year 1960-61 under section 16(3)(b) of the Indian Income-tax Act, 1922. Since the assessee did not appear in court, no costs were awarded.