1987 (11) TMI 143 - AT - Income Tax

Summary

Issues:
- Deduction of income tax attributable to income earned by minor children added to parent's income under s. 64 of the IT Act 1961.
- Whether the tax liability on the income of the minor added to the parent under s. 64 is a personal liability of the parent or can be attributed to the minor.

Analysis:
1. The appeals by the Revenue challenged the orders of the AAC/CWT(Appeals) allowing the deduction of income tax attributable to the income earned by minor children added to their parent's income under s. 64 of the IT Act 1961.

2. The minor children were admitted to the benefits of a partnership firm, and their income was included in the total income of their parent. The dispute arose regarding the tax liability debited to the accounts of the minors. The AAC found that these debits reduced the wealth of the minor assessee and should not be ignored in computing the net wealth.

3. The Revenue contended that the tax liability on the income of the minor added to the parent under s. 64 was a personal liability of the parent and could not be imposed on the minor. They argued that the amounts claimed as deductions should be disallowed.

4. The assessee argued that the tax liability debited to the accounts of the minors was actually a tax on the income of the minor, collected through the parent. They relied on legal precedents and provisions of s. 65, indicating that the Revenue could resort to the minor's property for tax collection, making it an admissible deduction in computing the net wealth.

5. The Tribunal held that the tax levied on the minor assessee themselves was deductible, and the dispute focused on the amounts debited to the minor's accounts. The Tribunal agreed with the assessee that the tax attributable to the income of the minor, collected through the parent, was an admissible deduction in computing the minor's net wealth. The Tribunal emphasized that the tax was on the income of the minor, even though collected through the parent, and the parent was entitled to reimbursement from the minor.

6. The appeals by the Revenue were dismissed, confirming the order of the AAC/CWT(A) allowing the deduction of income tax attributable to the income of the minor children added to the parent's income under s. 64 of the IT Act 1961.