1982 (6) TMI 46 - HC - Income Tax

Inclusion of Minor's Income in Assessee's Income Upheld Under Income Tax Act

The court upheld the inclusion of a minor child's income in the individual assessee's income under Section 64(1)(iii) of the Income Tax Act, emphasizing ... Total Income Issues:1. Interpretation of Section 64(1)(iii) of the Income Tax Act regarding the inclusion of minor child's income in the individual assessee's income.2. Validity of the orders passed by the ITO, AAC, and Income-tax Appellate Tribunal in relation to the computation of income for the assessment year 1976-77.Analysis:1. The judgment revolves around the interpretation of Section 64(1)(iii) of the Income Tax Act, which directs the inclusion of income arising to a minor child from being admitted to the benefits of partnership in a firm in the individual assessee's income. The court clarified that this provision does not differentiate based on whether the individual assessee's income is above or below the taxable limit. The court emphasized that the provision aims to prevent tax evasion by including such income in the individual's tax liability. The court rejected the contention that the minor's income can only be included if the individual's income exceeds the taxable limit, stating that there is no ambiguity in the language of the provision to support such a distinction.2. The judgment also scrutinized the orders passed by the authorities in the assessment year 1976-77. Initially, the ITO added a sum to the assessee's income, which was later deleted by the AAC. The assessee then filed an application under Section 154 of the Income Tax Act to rectify the assessment order. The AAC accepted the assessee's contention and directed the ITO to exclude the minor's share income from the computation. However, the Income-tax Appellate Tribunal set aside the AAC's order, stating that only rectification of tax liability quantum could be ordered under Section 154, and no income originally included could be excluded. The Tribunal did not delve into the main contention regarding the minor child's income computation.3. Ultimately, the court dismissed the writ petition filed by the assessee, upholding the orders of the authorities. The court justified the ITO's decision, stating that the inclusion of the minor child's income was proper and cannot be excluded through a Section 154 application. The court emphasized that the provision in Section 64(1)(iii) aims to prevent tax evasion and rejected the assessee's argument regarding the applicability of the provision based on the individual assessee's income level.In conclusion, the judgment clarifies the interpretation of Section 64(1)(iii) of the Income Tax Act and upholds the orders of the authorities regarding the computation of income for the assessment year 1976-77, emphasizing the prevention of tax evasion through the inclusion of minor child's income in the individual assessee's income.