9911796707
TMI Blog2003 (4) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... DY J.-At the instance of the Revenue, the Income-tax Appellate Tribunal, Hyderabad "A" Bench, Hyderabad (for short, "the Tribunal"), referred the following questions, said to arise out of its order in I.T.A. No. 769 of 1983, dated September 25, 1986, for the assessment year 1978-79 under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion of this court: "(i) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the share income derived by the minor, Shri T. Surya Baparao, by reason of his admission to the benefits of partnership should be regarded as share income of the Hindu undivided family represented by the minor? (ii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the share income derived by the minor, Shri T. Surya Baparao by reason of his admission to the benefits of partnership was not his individual income and hence the provisions of section 64(1)(iii) did not apply? (iii) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the minor, Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner confirmed the view of the Income-tax Officer. On further appeal, the Tribunal held that there was no bar for the minor to represent the joint family, that there was a direct nexus between the family funds and the share income earned by the minor and hence the same should be rightfully assessed in the hands of the Hindu undivided family, represented by the minor, T. Surya Baparao. It was also further held that neither the capital nor the share income derived therefrom exclusively belongs to the minor, T. Surya Baparao, and hence the share income cannot be included in the income of the assessee, who is the mother of the minor. Thus, the appeal was allowed. Hence, the present reference at the instance of the Revenue. Sri S.R. Ashok, learned standing counsel for the Income-tax Department, contended that the Tribunal has committed an error in holding that the income derived from the firms by the minor, who was admitted to the benefits of the firm, should be assessed in the hands of the Hindu undivided family. According to learned standing counsel, when once a minor is admitted to the benefits of the partnership firm, the income derived thereunder belongs to the minor as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the income received by the minor by way of admission to the benefits of the partnership firm relates to the investment of the Hindu undivided family funds. Therefore, there is a direct nexus between the income received by the minor by way of admission to the benefits of the firm with reference to the investment of the Hindu undivided family funds in the partnership business. Almost an identical issue was considered by the apex court in the case of Y.L. Agarwalla v. CIT [1978] 114 ITR 471. In that case, one Yudhisthir Lal Agarwalla, karta of a Hindu undivided family, was a partner in a firm, Grand Smithy Works, having 36 per cent. shares therein. One of the clauses of the partnership firm contemplates that the death or retirement of any of the partners shall not have the effect of dissolving the partnership and that the business be carried on by the surviving partners and the heirs or legal representatives of the deceased and/or retiring partner or if mutually agreed upon, between the surviving partners and heirs, etc., of the deceased or retiring partner with outsiders also. The karta of the Hindu undivided family died on December 18, 1967, leaving behind him his widow, six dau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons but was the income of the Hindu undivided family and had to be assessed to tax in the hands of the family." Learned standing counsel, however, contended that the abovesaid judgment does not apply to the facts of the present case inasmuch as the apex court was not considering the provisions of section 64 of the Act. Though the apex court was not considering the provisions of section 64 of the Act, it was considering the question with reference to the nature of income derived by the minors, who are admitted to the benefits of the partnership firm and in that context held that when there was a nexus between the Hindu undivided family funds and the benefit of the partnership by way of admission of the minors to the benefits, the income derived by way of benefit from the firm relates to the Hindu undivided family, whose funds were made available to the firm for its business. When once the income derived in that process does not belong to the individual, but belongs to the Hindu undivided family, such income cannot be includible in the income of the assessee-mother in terms of section 64 of the Act, but assessable as the income of the family. Learned standing counsel also relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried to the Appellate Tribunal, the Tribunal took the view that there was no bequest and the admission of the minor to the benefits of the firm was only in lieu of the capital lying to the credit of the erstwhile Hindu undivided family, represented by its karta, Jayarama Pillai, and, therefore, the income received by the minor has got nexus to the investment of the Hindu undivided family, and, therefore, the said income is not the individual income of the minor and not includible in terms of section 64(1)(iii) of the Act. A Division Bench of the Madras High Court, on the facts, gave a finding that the minor succeeded to the properties, as per the document executed by Jayarama Pillai, in his individual capacity and, therefore, the income derived by the minor, Muthukumar is computable and includible to the assessee, the mother of the minor in terms of section 64(1)(iii) of the Act. The Division Bench also distinguished the judgment of the apex court in the case of Y.L. Agarwalia [1978] 114 ITR 471 on the premise that the apex court was not considering the issue with reference to the provisions of section 64(1)(iii) of the Act. It was also further observed that when once the minor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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