Earned income relief depends on active participation; included family income does not qualify unless the statutory test is met.

Earned income relief under section 2(6AA) applies only where the income satisfies the statutory definition of earned income, including the requirement that it be earned by the assessee or, in the case of a firm, by an actively engaged partner. Income of minor sons included in the father's total income does not become earned income in the father's hands merely because it is aggregated for tax purposes. The inclusive wording of the definition does not remove the active participation condition. The Supreme Court therefore upheld the view that only income actually earned through the assessee's own qualifying participation can attract the relief.

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Issues: Whether, for earned income relief under section 2(6AA) of the Income-tax Act, the share income of minor sons included in the father's total income could be treated as earned income of the father, even though the minors themselves were not actively engaged in the conduct of the business.

Analysis: The definition of earned income covered income included in an assessee's income from another person, but only if the income answered the statutory description of earned income. The controlling requirement was that the income must have been earned by the assessee, or, in the case of a firm, by the assessee as a partner actively engaged in the conduct of the business. The inclusive part of the definition did not dispense with that condition. The court held that the words "such income" referred back to earned income as so defined, and that the active participation requirement applied equally where the income of another person was included in the assessee's total income.

Conclusion: The share income of the minor sons was not separately eligible for earned income relief in the father's hands merely because it was included in his total income; only the income actually earned by the assessee through his own active participation as a partner qualified. The answer given by the High Court was therefore upheld.

Ratio Decidendi: For the purpose of earned income relief, income included in an assessee's total income from another person qualifies only if it satisfies the statutory conditions of earned income, including the requirement that the assessee himself, or the assessee as an actively engaged partner, earned it.

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