1974 (2) TMI 16 - HC - Income Tax

Summary

Issues:
1. Inclusion of minor's share income from firms in total income for rate purposes.

Analysis:
The judgment addressed the issue of whether the share income of a minor from certain firms, which had already been taxed in the hands of the minor's father and mother, could be included in the minor's total income for rate purposes. The minor, admitted to the benefits of partnership in three firms, had his share of profit from two firms taxed in his parents' hands under section 64 of the Income-tax Act, 1961. The minor's share income from a third firm, where neither parent was a partner, was also reported. The Income-tax Officer added the share income from the first two firms to the minor's total income for rate purposes, but the Appellate Assistant Commissioner annulled the assessment for one year due to the income falling below the taxable limit.

The Commissioner held that the minor's income, already assessed in the parents' hands, should not be included again in the minor's total income. However, both parties filed cross-appeals, leading to the Tribunal's decision. The Tribunal determined that there was no provision exempting the minor's share income from inclusion for rate purposes, even if previously taxed in the parents' hands. The Tribunal referred to relevant sections of the Income-tax Act, emphasizing that total income includes income from all sources. It concluded that the minor's share income from the first two firms should be included in the minor's total income for rate purposes.

The High Court analyzed the provisions of the Income-tax Act, particularly section 2(45) defining "total income" and section 5(1) encompassing all income received by a person. It highlighted Chapter VI's aggregation of income and the conditions under which income is included in total income. Section 66 specified the types of income to be included, excluding income not subject to tax under Chapter VII. The Court concluded that the minor's share income, covered by section 64, did not fall under the category of income exempt from tax under Chapter VII, thus should be included in the minor's total income for rate purposes.

Ultimately, the Court answered the question in favor of the assessee, stating that the minor's share income, although taxed in the parents' hands, should still be included in the minor's total income for rate purposes under the relevant provisions of the Income-tax Act. The Court awarded costs to the assessee and upheld the Tribunal's decision regarding the inclusion of the minor's share income in the total income for rate purposes.