1987 (11) TMI 22 - HC - Income Tax

Inclusion of Minor Children's Share Income Upheld for Assessment Years

The court upheld the inclusion of share income of minor children in the hands of the assessee for assessment years 1976-77 and 1977-78 under section ... HUF, Total Income Issues:1. Interpretation of section 64(1)(iii) of the Income-tax Act for assessment years 1972-73, 1976-77, and 1977-78.2. Inclusion of share income of minor children in the hands of the assessee as an individual.3. Validity of assessments made by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal.Analysis:1. The judgment of the court was delivered concerning a reference made by the Income-tax Appellate Tribunal at the instance of the Revenue under section 256(1) of the Income-tax Act, 1961. The reference pertained to the assessment years 1972-73, 1976-77, and 1977-78. The primary question for consideration was whether the Appellate Tribunal was correct in law in upholding the order of the Appellate Assistant Commissioner canceling the assessments made on the assessee for each of the assessment years under reference.2. For the assessment year 1972-73, the Income-tax Officer included the share income of minor sons in the hands of the assessee as an individual under section 64(1)(iii) of the Income-tax Act. However, the assessee argued that based on a previous court decision, the income of the minor sons should not be included in his total income. The appellate authorities, including the Tribunal, accepted this contention, citing the precedent. Therefore, the share income of the minor sons for the assessment year 1972-73 was not liable to be included in the assessee's total income.3. In contrast, for the assessment years 1976-77 and 1977-78, the amended provisions of the Taxation Laws (Amendment) Act, 1975, required the inclusion of the share income of minor children in the total income of the assessee. The assessee argued that since he had no income as an individual, the income of the minor children from the partnership should not be included in his total income. However, the court referred to a previous decision and held that the inclusion of the share income of minor children is valid even if the individual in whose hands the income is included does not have income.4. The court relied on the decision in CIT v. Gopal Rao [1985] 151 ITR 308, stating that the amended provisions of section 64(1)(iii) do not require the individual to have income before including the share income of minor children. Therefore, for the assessment years 1976-77 and 1977-78, the inclusion of the share income of minor children in the hands of the assessee as an individual was deemed valid, and the Tribunal's direction to exclude such income was not justified. Consequently, the reference was answered in favor of the Revenue for the assessment years 1976-77 and 1977-78 and in favor of the assessee for the assessment year 1972-73.