TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 35
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....of individual. The appellant filed return in the name of his daughter K. Sandhyarani under section 143(1)(a) of the Income Tax Act, 1961 (hereinafter called "the Act") for the years 1992-93 to 1997-98 declaring the income for the respective years. It is stated that Smt. K. Sadhyarani, who happens to be the daughter of the appellant was deriving income from M/s. Parbati Engineering Works till her marriage in 1994. After marriage she could not give personal attention and executed power of attorney in favour of the appellant to run the business. It is stated that Smt. K. Sandhayarani got proprietorship of M/s. Parbati Engineering Works from her mother Smt. S. Parbati having purchased same from her mother on payment of Rs. 10,000/- and executed a promissory note of Rs. 60,000/- as security in favour of her mother. It is averred that M/s. Parbati Engineering Works is a separate small scale unit under the Director of Industries and has got licence under the Sales Tax department. It is alleged inter alia that the Assessing Officer without affording reasonable opportunity of being heard reopened the assessment under sections 144/147 of the Act by issuing notice under section 148 of the Act....
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....TAT has also failed to appreciate that the Assessing Officer without following the statutory provisions of the Act has reopened the case under section 148 of the Income Tax Act. He further submitted that section 64 of the Act provides that income of an individual will also include the income of spouse, minor daughter etc. under certain circumstances as has been provided therein and the impugned order passed by the Tribunal has not taken into consideration properly about applicability of such statutory provision. Section 64 (1-A) of the Act provides that income accruing to a minor child shall be included in the total income of the individual in particular situation, otherwise clubbing is not legally permissible. But in the present case the authorities below without considering such provision of law, clubbed the income of the daughter of the appellant, who is major at the time of assessment with the income of the appellant. It is submitted by learned counsel for the appellant that the order passed by the ITAT being dehors to the provisions of law should be set aside. Learned counsel for the appellant raises the following questions of law for determination: (i) Whether in the facts ....
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....OINT FOR CONSIDERATION. 6. The points for consideration in these appeals as formulated by the Court is "Whether in the facts & circumstances of the case, it is legal and justified to club the income of a daughter at the hands of her father and whether it is contrary to the provisions of Section 64 of the Income Tax Act, 1961?" DISCUSSIONS. 7. It is an admitted fact that the appellant is an assessee under individual capacity. It is also an admitted fact that Smt. K. Parbati is the wife of the appellant and Smt. K. Sandhyarani is the daughter born out of their wedlock. It is also the admitted fact that the appellant being assessee has derived his income in his fabrication unit in the name of Jeypore Small Scale Industries. 8. It is the claim of the appellant that M/s. Parbati Engineering Works belonged to his wife and subsequently it has been transferred by his wife to his daughter K. Sandhyarani. With regard to the manner of purchase of such unit it is revealed from the orders of assessment that daughter paid Rs. 10,000/- and a promissory note of Rs. 60,000/- in favour of her mother as consideration. It is revealed from the orders passed by the authorities below including the ....
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....e minor's contract was held to be void as he cannot be the mortgagor, the relevant paragraphs referred to in the aforesaid decision are extracted hereunder :- "Looking at these sections their Lordships are satisfied that the Act makes it essential that all contracting parties should be "competent to contract," and expressly provides that a person, who by reason of infancy is incompetent to contract, cannot make a contract within the meaning of the Act" In the later part of the same paragraph, it is stated, "The question whether a contract is void or voidable presupposes the existence of a contract within the meaning of the Act, and cannot arise in the case of an infant. Their Lordships are therefore of opinion that in the present case there is not any such voidable contract as is dealt with in section 64." Thus, it was held that a minor cannot be a contracting party, as a minor is not competent to contract as per Section 11 of the Indian Contract Act. At this juncture, it is also necessary to extract Sections 2 and 11 of the Indian Contract Act, 1872 which read as under:- "2.Interpretation-clause. In this Act the following words and expressions are used in the following senses,....
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.... the reason that the deceased mother at the time of execution and registration of the document was a minor, aged 15 years, and she was not represented by her natural guardian to constitute the document as valid as she has not attained majority according to law. Many courts have held that a minor can be a mortgagee as it is transfer of property in the interest of the minor. We feel that this is an erroneous application of the law keeping in mind the decision of the Privy Council in Mohori Bibee's case (supra). 10. As per the Indian Contract Act, 1872 it is clearly stated that for an agreement to become a contract, the parties must be competent to contract, wherein age of majority is a condition for competency. A deed of mortgage is a contract and we cannot hold that a mortgage in the name of a minor is valid, simply because it is in the interests of the minor unless she is represented by her natural guardian or guardian appointed by the court. The law cannot be read differently for a minor who is a mortgagor and a minor who is a mortgagee as there are rights and liabilities in respect of the immovable property would flow out of such a contract on both of them. Therefore, this Cour....
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....by his wife K. Parbati. On the other hand, we are of the considered view that M/s. Parbati Engineering Works is a Benami property of the appellant. 12. Section 64 of the Income Tax Act reads in the following manner:- 64. Income of individual to include income of spouse, minor child, etc.- (1) In computing the total income of any individual, there shall be included all such income as arises directly or indirectly- (i) [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.] (ii) to the spouse of such individual by way of salary, commission, fees or any other form of remuneration whether in cash or in kind from a concern in which such individual has a substantial interest: Provided that nothing in this clause shall apply in relation to any income arising to the spouse where the spouse possesses technical or professional qualifications and the income is solely attributable to the application of his or her technical or professional knowledge and experience ; xx xx xx 64 (1A) In computing the total income of any individual, there shall be included all such income as arises or accrues to his minor child, not being a minor child suffering from any disability of the nature specifie....