TMI Blog1961 (7) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... Hindu undivided family? The assessment year is 1954-55 and the accounting year is 1953-54. One Kishanlal Agarwal was assessed as an individual in respect of the income arising from the business carried on in the name of Shri. Krishna Rice Mills. Kishanlal died in the year 1950 leaving his widow and his two minor sons--Basant and Ashok. In the year 1952, his widow died, and, after her death, the family consisted of her two sons--Basant and Ashok--who were minors. An application was, therefore, made before the Subordinate Judge, Nowgong, praying that a guardian be appointed of the minor's person and property and an interim appointment was made by the court by its order dated the 1st June, 1953, appointing one Nandlal Agarwal as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he two guardians, Nandlal Agarwal and Dwarka Prosad Agarwal, under section 23(3) read with section 41 of the Indian Income- tax Act as an association of persons on a total income of ₹ 32,593. On appeal, the Appellate Assistant Commissioner took the view that the case was covered by sections 40 and 41 of the Income-tax Act since the shares of the two minors were definite and ascertainable. He, therefore, set aside the order of the Income-tax Officer and directed him to start proceedings for each of the two minors separately. The department went up in appeal to the Appellate Tribunal. The Appellate Tribunal reversed the decision of the Appellate Assistant Commissioner. The Tribunal came to the following finding: Firstly, that up to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llows: 40.(1) Where the guardian or trustee of any person being a minor, lunatic or idiot (all of which persons are hereinafter in this sub- section included in the term 'beneficiary') is entitled to receive on behalf of such beneficiary, or is in receipt on behalf of such beneficiary of, any income, profits or gains chargeable under this Act, the tax shall be levied upon and recoverable from such guardian or trustee, as the case may be, in like manner and to the same amount as it would be leviable upon and recoverable from any such beneficiary if of full age or sound mind and in direct receipt of such income, profits or gains, and all the provisions of this Act shall apply accordingly. (2) Where the trustee or agent of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the liability which is already there upon the assessee under the other provisions of the Income-tax Act. Section 40 deals with a case of minor, lunatic or idiot and where a guardian or trustee is appointed, and what it provides is that when you have a guardian or a trustee and he receives or is entitled to receive on behalf of his ward or beneficiary any income, he is liable to pay tax upon that income in the like manner and to the same amount as it would be leviable upon and recoverable from any such beneficiary if of full age and sound mind and in direct receipt of such income, profits or gains, and all the provisions of this Act shall apply accordingly. Therefore, to use simple language, section 40 imposes a vicarious liability upon a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies were the two minors separately. The two minors are the wards of the guardians. The guardians will, in our opinion, be liable to pay tax on the separate income of each of the minors. The business was, no doubt, carried on by the guardians as a single unit and the integrity of the business was not broken, but the guardians are not taxed under section 40. As joint guardians they had to carry on the business on behalf of the minors but the minors cannot be said to be carrying on the business as a Hindu undivided family. The income which comes into the hands of the guardians on behalf of their wards is the share of the profit of each of them separately. That the responsibility of the guardians is joint does not mean that their ward is the Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the death of Kishanlal these two members constituted a joint family. From this it does not necessarily follow that the income of the business run by Kishanlal will be a joint family property in the hands of his sons which they get by inheritance. Mr. Choudhary, who appears for the department, has contended that the presumption will be that the property inherited by the two minor sons--namely the business run by Kishanlal--will be treated to be an ancestral property in the hands of the two sons and thus it will in the absence of any evidence that it was treated as a separate property by the members of the joint family be presumed to be a joint family property. This question is relevant only if the minors were directly assessed as Hindu undiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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