1983 (3) TMI 44 - HC - Income Tax

High Court ruling: Minor children's share income clubbed with assessee's income under Income Tax Act

The High Court of Madhya Pradesh affirmed the clubbing of minor children's share incomes with the assessee's income under section 64 of the Income Tax ... Clubbing Of Income Of Minor Child, Inclusions In Total Income, Minor Child, Total Income Issues:1. Validity of initiating proceedings under section 147 of the Income Tax Act.2. Clubbing of share incomes of minor children with the assessee's income.3. Permissibility of double assessment of the same income.4. Interpretation of section 64(1)(ii) regarding clubbing of minor children's share incomes.Analysis:Validity of Initiating Proceedings under Section 147:The Income Tax Appellate Tribunal referred questions regarding the initiation of proceedings under section 147 for assessment years 1972-73 and 1973-74. The Tribunal observed that the assessee conceded that section 64 of the Income Tax Act required including the share of minor sons in the assessee's total income. Consequently, the Tribunal did not address the legality of initiating proceedings under section 147 due to the assessee's concession.Clubbing of Share Incomes of Minor Children:The Tribunal upheld the clubbing of the share incomes of the minor sons with the assessee's income under section 64 of the Act. The assessee contended that since the minors were separately assessed for their share income, including it in the assessee's income would result in double taxation. However, the Tribunal found that under section 64, the share income of the minors must be clubbed with the assessee's income. The Tribunal also noted that the Commissioner may cancel the separate assessments of the minors upon clubbing their income with the assessee.Permissibility of Double Assessment:The assessee argued against the double assessment of the same income, claiming that the minors' income had already been assessed separately. However, the Tribunal held that under section 64, the share income of the minors should be assessed in the hands of the assessee if applicable, even if the minors were previously assessed separately. The Tribunal found no legal provision preventing the clubbing of the minors' income with the assessee's income.Interpretation of Section 64(1)(ii):Regarding the interpretation of section 64(1)(ii), the Tribunal clarified that if an assessee has multiple minor children whose income needs to be assessed in their hands, all such incomes must be clubbed with the assessee's income. The Tribunal determined that section 64(1)(ii) allows for the clubbing of the share income of all minor children with the assessee's income, supporting the assessment of the minor children's share income in the assessee's individual hands.Conclusion:The High Court of Madhya Pradesh answered the referred questions affirmatively, supporting the clubbing of minor children's share incomes with the assessee's income under section 64 of the Income Tax Act. The judgment clarified the legal provisions regarding the assessment and clubbing of minor children's incomes with the assessee's income, emphasizing compliance with the provisions of the Act.