2004 (5) TMI 235 - AT - Income Tax

Tribunal rules minor children's agricultural income not clubbed with parent's income

Smt. Babita P. Kanungo. Versus Deputy Commissioner Of Income-tax, Circle 25 (1).

The Tribunal allowed the appeal, ruling that the agricultural income of the minor children of the assessee cannot be clubbed with the agricultural income ... Transfer Of Assets Issues:Clubbing of agricultural income pertaining to minors under section 64 of the Income-tax Act, 1961 in the hands of the assessee (parent) for rate purposes.Analysis:1. The appeal questioned the clubbing of agricultural income of minors in the hands of the appellant under section 64, contending that agricultural income does not form part of total income as per section 10(1) and thus cannot be clubbed. The appellant relied on section 64(1A) to argue that only the total income of a minor should be clubbed with the parent's income.2. The contention was supported by the argument that the judgment in a specific case was inapplicable as there was no transfer of assets to the minor children. The department argued that all income accruing to a minor child must be clubbed under section 64(1A), excluding specific exclusions. However, it was noted that there was no evidence of the lands being transferred by the assessee to the minor children.3. The Tribunal found that even if the lands were transferred, agricultural income of minor children cannot be clubbed with the parent as agricultural income does not form part of total income. Section 64(1A) mandates clubbing of the total income of minor children, which does not include agricultural income as per section 10(1).4. The Tribunal emphasized that for rate purposes, agricultural income can only be considered when it exceeds a certain threshold for the assessee, as per the Finance Act, 1997. It was clarified that section 64(1A) is specific to clubbing total income of a minor child with the parent's income, and agricultural income of minor children cannot be considered as the parent's agricultural income for rate purposes.5. Consequently, the Tribunal allowed the appeal, ruling that the agricultural income of the minor children of the assessee cannot be clubbed with the agricultural income of the assessee under section 64(1A) for rate purposes, in line with the provisions of the Income-tax Act and the Finance Act, 1997.