1985 (3) TMI 38 - HC - Income Tax

Court affirms exclusion of minor's income from guardian's total income, upholding income attribution principles.

The court upheld the Tribunal's decision to exclude speculation income earned in the name of the assessee's minor daughter from the assessee's total ... Addition To Income, Income Issues:Assessment of speculation income in the name of a minor daughter, inclusion of income in the hands of the assessee, authority of guardian to conduct business on behalf of a minor, legality of speculation business in the name of a minor, application of income-tax laws to minor's income.Analysis:The judgment pertains to a reference under section 256(1) of the Income-tax Act, 1961, where the assessment for the year 1966-67 was reopened due to speculation income earned in the name of the assessee's minor daughter. The Income-tax Officer included the speculation income in the assessee's assessment, contending that the business really belonged to him, not the minor. However, the Appellate Assistant Commissioner disagreed, stating that even if the business was illegal, the income should be assessed in the minor's hands. The Tribunal upheld this view, emphasizing that the guardian had the authority to conduct business on behalf of the minor, and the income belonged to the minor, not the guardian.The main legal question raised was whether the Tribunal was correct in excluding the speculation income from the total income of the assessee. The Revenue argued that the income should be assessed in the hands of the father, as the minor could not conduct the business herself. Conversely, the assessee relied on legal principles from a previous case to support the exclusion of the income from the father's total income. The court noted that the Tribunal's findings, which favored the assessee, were not challenged by the Revenue, leading to a conclusion based on those facts.In a previous case cited, it was established that when a minor conducts business through a guardian, the income earned belongs to the minor, not the guardian. The court reiterated that the minor was carrying out the business through her father as a guardian, and the income should not be included in the guardian's total income. The court upheld the Tribunal's decision, emphasizing that the business was conducted by the guardian on behalf of the minor, and the income rightfully belonged to the minor.In conclusion, the court affirmed that the Tribunal's decision to exclude the speculation income from the assessee's total income was correct based on the facts presented. The judgment highlights the legal principles governing the assessment of income earned by minors through guardians and reinforces the distinction between the income of the minor and the guardian in such cases.