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TMI Blog2013 (7) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... 93-94 and 1994-95, the petitioner filed her Income Tax Returns declaring total income of Rs. 1,23,610/- and Rs. 1,77,560/-, respectively. While filing the said Returns, the petitioner had added a note to her Returns that she had not included in her income, the income of her two minor sons arising in their own right and without the aid of any assets or funds provided by her to them directly or indirectly. The Assessing Authority completed the assessment of the petitioner under Section 143(3) of the Act at Rs. 3,53,832/- (her income and income of the minor sons) for the Assessment Year 1993-94 and at Rs. 4,55,860/- (her income and income of the minor sons) for the Assessment Year 1994-95 by clubbing the income of two minor sons of the petitioner with the income of the petitioner in her hands as her income was greater than that of her husband. The aforesaid assessment order was upheld in appeal by the Commissioner of Income Tax (Appeals), Amritsar and in second appeal by the Income Tax Appellate Tribunal. The appeals filed by the petitioner against these two assessment orders under Section 260A of the Act bearing ITA Nos.269 of 2005 and 270 of 2005 are pending in this Court. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their property nor can they take decisions on the disposal of income arising therefrom. These responsibilities fall on the parents, who, for all practical purposes, treat and use this income as part of their own income. Exclusion of minor children's income from the income of their parents also leads to tax avoidance." The reason for introduction of Section 64(1A) of the Act was further explained in Circular No.636 dated August 31, 1992 issued by the Central Board of Direct Taxes, which reads as under:- "36.1 In reality as well as in law, the minor children cannot administer their property nor can they take decisions on the disposal of income arising therefrom. These responsibilities fall on the parents, who, for all practical purposes treat and use this income as part of their own income. Exclusion of minor children's income from the income of their parents also leads to tax avoidance. The aforesaid provisions of Section 64 with regard to clubbing of minors' income had also led to litigation between Income-tax Department and the assessees." The effect of this insertion is that all the incomes of the minor child, whether earned in his/her own right or not, are clubbed with the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g violative of Section 6 of the Hindu Minority and Guardianship Act. The question of validity of sub-section (1A) of Section 64 of the Act as a whole came up for consideration before Madras High Court in case of K.M. Vijayan and others Versus Union of India and others, [1995] 215 I.T.R. 371 (Mad). The Full Bench of the Madras High Court has upheld the constitutional validity of the said provisions, while observing as under:- "A tax law like any other law must also satisfy the conditions: (i) that the Legislature was competent to enact it; and (ii) that it does not infringe any of the fundamental rights. However, there is always a presumption in favour of the constitutionality of a statute and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. If the Legislature feels that there is a possibility of evasion of one's income by showing it as the minor's income and to avoid such evasion the clubbing of income earned by a minor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1A) of the Income-tax Act, 1961, was inserted by the Finance Act, 1992, with effect from April 1, 1993, i.e., the assessment year 1993- 94. Section 64(1A) now covers all income of the minor (with the exception of earned income) irrespective of the fact whether there is a nexus between the earning of such income and the overt act of the parent. Section 64(1A) is a machinery provision. When provisions are made to block loopholes for any possible tax avoidance, the Legislature is competent to have a wider field of discretion not only for the substantive provision but for procedural provisions as well. Section 64(1A) is a provision for computation of income of an individual whose minor child is having income and that by itself constitutes a different class. Instead of providing a separate slab, it is provided that the income of such minor would be included in the income of the individual. There is no lack of competence in the Legislature for providing such a legislation. The object sought to be achieved is to tax the income and simply because by including the income of the minor in the hand of either of the parents, he or she has been subjected to a higher tax burden, it cannot be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Rs.natural guardian' has been defined in Section 4(c) as noticed above to mean any of the guardians as mentioned in section 6 of the Act of 1956. This section refers to three classes of guardians viz., father, mother and in the case of a married girl the husband. The father and mother therefore, are natural guardians in terms of the provisions of Section 6 read with Section 4(c). Incidentally it is to be noted that in the matter of interpretation of statute the same meaning ought to be attributed to the same word used by the statute as per the definition section. In the event, the word Rs.guardian' in the definition section means and implies both the parents, the same meaning ought to be attributed to the word appearing in Section 6(a) and in that perspective mother's right to act as the guardian does not stand obliterated during the lifetime of the father and to read the same on the statute otherwise would tantamount to a violent departure from the legislative intent. Section 6(a) itself recognises that both the father and the mother ought to be treated as natural guardians and the expression Rs.after' therefore shall have to be read and interpreted in a manner so as not to def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the minor child shall be included where the marriage of his parents subsists, in the income of that parent whose total income is greater, is contrary to the provisions of Section 6 of the Hindu Minority and Guardianship Act and violative of Article 14 of the Constitution, does not arise. The object of the impugned provision is to tax the minor's income in the hands of the parents whose income is greater by clubbing the income of the minor in his or her own right. When both mother and father are natural guardians, then adding the income of the minor child in the income of the parent, whose income is greater, cannot be said to be arbitrary, artificial or evasive of the object sought to be achieved.
Thus, in view of the foregoing reasons, we uphold the constitutional validity of sub-section (1A) of Section 64 of the Act, including Clause (a) of Explanation to the said sub-section. In our view, the Legislature was within its right to enact these provisions and the same are not violative of Article 14 of the Constitution of India or Section 6 of the Hindu Minority and Guardianship Act. Thus, finding no merit in the petition, the same is hereby dismissed. X X X X Extracts X X X X X X X X Extracts X X X X
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