1950 (9) TMI 19 - HC - Income Tax

Court includes minors' partnership profits in mother's income under Indian Income-tax Act Section 16(3)(a)(ii)

The court ruled in favor of including minors' shares of profits from a partnership firm in the mother's assessable income under Section 16(3)(a)(ii) of ... - Issues:- Interpretation of Section 16(3)(a)(ii) of the Indian Income-tax Act regarding the inclusion of minors' shares of profits in the mother's assessment.Analysis:The case involved a reference under Section 66(1) of the Indian Income-tax Act by the Income-tax Tribunal, Allahabad Bench, regarding the correct interpretation of Section 16(3)(a)(ii) of the Act. The question at hand was whether the inclusion of the three minors' shares of profits from a partnership firm in the mother's assessment was correct. The partnership firm, Messrs. Baijnath Madan Lal, had partners including a mother and her minor sons. The Income-tax authorities had included the minors' shares of profits in the mother's income for assessment under Section 16(3)(a)(ii) of the Act, leading to a tax assessment of &8377;16,353. The central issue revolved around the interpretation of the provision in question.The relevant provision, Section 16(3)(a)(ii) of the Indian Income-tax Act, pertains to the inclusion of income arising from the admission of a minor to the benefits of partnership in the income of the individual for assessment purposes. The court analyzed the language of the provision and the intent behind its enactment. The argument put forth was whether the term 'individual' in the provision referred specifically to a male individual or could also include a female individual. The court acknowledged that while the term 'individual' was intended to denote a unit for income-tax purposes, it could encompass both males and females. The crux of the debate was whether the provision should be construed to apply solely to male individuals.The court examined the language of Section 16(3)(a)(ii) in conjunction with other clauses and emphasized that the word 'individual' encompassed both genders. The court rejected the argument that the provision was gender-specific and highlighted that the legislative intent was to prevent tax avoidance practices involving minors' income. The court emphasized that the provision aimed to address tax evasion strategies by parents, irrespective of gender, and should not be narrowly interpreted to apply only to male individuals.In conclusion, the court answered the reference question in the affirmative, stating that the minors' shares of profits from the partnership firm could be included in the mother's assessable income under Section 16(3)(a)(ii) of the Indian Income-tax Act. The judgment clarified the inclusive nature of the term 'individual' in the provision and upheld the tax assessment based on the interpretation of the relevant statutory provision.