Income Tax Act Amendment Not Retrospective: Minor Sons' Income Excluded from Father's 1975 Assessment.

The judgment concluded that Section 64(1)(iii) of the Income Tax Act, 1961 could not be applied retrospectively to the accounting year ending on 31st December 1975. Consequently, the share income and interest income of the minor sons were not assessable in the hands of the assessee father for the period before the amendment's effective date. The reference was answered in the negative, affirming that such income should not be included in the father's total income for the relevant assessment year. The Tribunal's decision was upheld, emphasizing the advisory role of the HC in such matters.

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Issues:
1. Interpretation of Section 256 of the Income Tax Act, 1961 regarding the scope of reference to the High Court.
2. Applicability of Section 64(1)(iii) of the Income Tax Act, 1961 on the share income of minor sons in the hands of the assessee father.
3. Determination of whether interest income earned by the minor sons should be included in the income of the assessee father.

Interpretation of Section 256 of the Income Tax Act, 1961:
The judgment highlighted the settled principle that the High Court's role in a reference under Section 66 of the Act is advisory, not appellate. The Court emphasized that it cannot raise new questions of law or go behind the Tribunal's findings of fact. The Supreme Court's stance in Rameshwar Prasad Bagla v. CIT was cited to establish that the High Court and Supreme Court act in an advisory capacity in such references, without appellate jurisdiction over the Tribunal's orders.

Applicability of Section 64(1)(iii) on Share Income of Minor Sons:
The case revolved around the assessment year 1976-77 and the inclusion of the share income of minor sons in the hands of the assessee father under section 64(1)(iii) of the Income Tax Act, 1961. The Tribunal's decision was based on the amended provision effective from 1-4-76, which mandated the inclusion of income arising to a minor child from a partnership firm in the individual's total income. The Tribunal found that the amended law applied to the assessment year in question, leading to the share income of the minor sons being rightly added to the assessee father's total income.

Inclusion of Interest Income in the Assessee's Income:
The judgment also addressed the contention regarding the inclusion of interest income earned by the minor sons in the assessee father's income. The Tribunal's decision was based on the minors contributing capital to the firm as required by the partnership deed. The Tribunal held that the interest income formed part of the share income added to the assessee father's total income under section 64(1)(iii) of the Act. Despite the argument against including interest income, the Tribunal's decision was upheld based on the minors' capital contribution to the firm.

Conclusion:
The judgment concluded that the amendment introducing Section 64(1)(iii) with effect from 1.4.1976 could not be applied retrospectively to the accounting year ending on 31st December 1975. Therefore, the income, including interest, of the minor sons was not assessable in the hands of the father for the period preceding the amendment's effective date. As a result, the reference was answered in the negative, indicating that the share income and interest of the minor sons should not be included in the assessee father's income.

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