1987 (11) TMI 143

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....irm for the period from 16th Aug., 1976 to 15th Aug., 1977 corresponding to the asst. yr. 1978-79 was included in the total income of their mother, C.K. Nalini by applying the provisions of s. 64(1)(iii)of the IT Act. In the current account of K.R. Beena one of the assessees before us, with the firm Chandrika Products there were three debits for tax liability totalling Rs. 2, 19,815 as follows: 1976-77 Rs. 68,260 1977-78 Rs. 71,874 1978-79 Rs. 79,681 After adjusting the share of net profit of Rs. 59,877.67 the balance carried down was Rs. 1,59,937.33 which was taken into account in computing the net wealth as on 31st March, 1978. Similarly, for the valuation 31st March, 1979 there is a further adjustment of a share profit of Rs. 74,5....

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....t two debits for 1976-77 and 1977-78 in respect of Rs. 68,260 and Rs. 71,874 mentioned above were the income tax liability of the minor assessee herself because they were in respect of assessment years prior to the minor being admitted to the benefits of the partnership. It was submitted that the dispute can refer only to the tax paid by the mother debited to the account of minor children. It was then pointed out relying on the decisions in the cases of Rai Bahadur H.P. Banerjee vs. CIT (1941)9 ITR 137(Pat) and O. Mohindroo vs. CIT (1975) 99 ITR 583(Del) and the commentary in Kanga & Palkhivala's Income-tax Law at page 604 that the income included under s. 64 in the total income of the parent remained the income of the minor and was not dee....

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....nder s. 64. This is quite in contract to a case of an income which is ordinarily exempt from tax but which is added to the taotal income for applying a higher rate of tax, as in the cases enumerated in s. 86. In such situation, it can be said that the tax is at higher rate on the income of the assessee while no tax is attributable to the income added to the total income for determining the higher rate. But in the present case instead of taxing the income of the minor in the hands of the minor, it is taxed in the hands of the parent at higher rate and it cannot be gainsaid that the income of the minor has, in fact, suffered tax. In such circumstances, it would be futile to argue that the minor need not reimburse the parent of the amount of t....