TMI Blog1991 (1) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... ga created a trust under the name and style of "Tanga Family Trust" by a deed dated February 1, 1976, with a view to providing education, medical aid and for marriage expenses, etc., for the named minor children of the assessee. The assessee was appointed as the trustee. The four beneficiaries who were minors were to have the profit and bear the losses equally. Similarly, their interest in the corpus of the trust was also equal. The assessee as the trustee invested the trust funds in the firms called "M/s. R. A. Tanga" and "M/s. Tanga Agencies" and as such the trustee on behalf of the trust became a partner in those firms. The assessment year in question is 1977-78. The income received by the trust thus was for the benefit of the minor be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts of the case. Further, the Tribunal held that the assessee being a doctor; actually derived income from the medical firms. Paragraph 10 is the only relevant passage on this question where in the Tribunal states thus : "As regards the assessment year 1977-78, the additional ground relates to application of section 64(1)(iii) and we having perused the orders of the lower authorities as also the paper book since placed on our Me and after giving due consideration to the submissions made before us, are of the opinion that since the assessee is an individual, section 64 of the Act has application to the facts of the case. We hold so, with the result, the impugned order of the Appellate Assistant Commissioner the above score also st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. Section 64 purports to gross up the income of the minor child in the hands of the parent. This being an exceptional measure will have to be strictly construed. Unless the language of the provision is clear, tax liability cannot be fastened on a person who is not legally the owner of the income. May be the device adopted in a particular case is such that income of the firm is shared by a minor child because of the beneficial provisions of the trust deed. But the question is whether the minor child who is a beneficiary under a trust deed can be held to have been admitted to the benefits of the partnership solely because the trust is a partner of the firm. The relevant words under section 64(1)(iii) are "admission of the minor to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. The effect of this Explanation is found in a circular issued by the Board, the relevant portion of which reads thus : "Under clause (iii) of section 64(1) the income arising to a minor child from the admission to the benefits of partnership is included in the total income of that parent who has the higher income, although neither of the parents is a partner in the firm to the benefits of which the minor is admitted. In order to effectively counter the device of circumventing this provision through interpolation of a trust, the Finance Act, 1979 has inserted new Explanation 2A to provide that where a minor child of an individual is a beneficiary under a trust and the trustee joins in any partnership business with any person, the income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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