TMI Blog2005 (9) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... erited movable and immovable properties of the deceased parents and also from her grandmother as per the Hindu Succession Act. The amounts received by her by way of inheritance and gifts on birthdays were invested by her grandfather in different business concerns in her name and derived income from moneylending, house properties and other sources. Her capital growth from the year ended 31st March, 1992 to the year ended 31st March, 1999 is as under: -------------------------------------------------------------- "The assessee was born on 14th Dec, 1990. During the year ended 31st March, 1992 the assessee received verifiable gifts from relatives. 2,65,000 Net interest, etc., income earned on these after paying income tax till 31.03.1992 52,776 ----------- 3,17,776 -do- 31.03.1993 1,62,290 ----------- 4,80,066 -do- 31.03.1994 8, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment of her income arose. The assessee computed her income but the return of income was filed at 'nil' on the ground that the income of minor is not taxable and she has paid the taxes thereon as per the rate in force but claimed refund in the return of income on the taxes paid. The AO in all these assessment years by way of reassessment or regular assessment under s. 143(3) or under s. 143(1)(a) of the Act assessed the entire income declared in the hand of the legal representative of the assessee, Sri R.P. Sarathy, grandfather. Aggrieved, the assessee's grandfather being the legal representative preferred an appeal before the CIT(A) who confirmed the action of the AO and accordingly, the addition made is sustained. Aggrieved, the assessee is in appeal before the Tribunal. 3. Before us, the learned counsel for the assessee, Shri S. Sridhar has argued that s. 64(1A) provides only clubbing of the minor's income with that of a parent and that the circumstances contemplated by the proviso to section are not present in the assessee's case. Accordingly, the assessment made in the hands of grandfather in the representative capacity of minor child, is against the provisions of the IT Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s arises or accrues to the minor child on account of any- (a) manual work done by him; or (b) activity involving application of his skill, talent or specialized knowledge and experience. Explanation.: For the purposes of this sub-section, the income of the minor child shall be included,- (a) where the marriage of his parents subsists, in the income of that parent whose total income (excluding the income includible under this sub-section) is greater; or (b) where the marriage of his parents does not subsist, in the income of that parent who maintains the minor child in the previous year, and where any such income is once included in the total income of either parent, any such income arising in any succeeding year shall not be included in the total income of the other parent, unless the AO is satisfied, after giving that parent an opportunity of being heard, that it is necessary so to do." 7. While bringing this provision on the statute book during the Budget Speech, the Finance Minister stated vide para 60 [(1992) 102 CTR (St) 17 : (1992) 194 ITR (St) 17] asunder: "60. It is said that the child is the father of man, but some of our taxpayers have converted children i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly to a minor child of such individual from,- (i) the admission of the minor to the benefits of partnership in a firm, (ii) assets transferred directly or indirectly to the minor child by such individual otherwise than for adequate consideration, and (iii) assets transferred directly or indirectly by such individual to any person or AOP otherwise than for adequate consideration, to the extent to which income from such assets is for the immediate or deferred benefit of such individual's minor child. In reality as well as in law, the minor children cannot administer their property nor can they take decisions on the disposal of income arising therefrom. These responsibilities fall on the parents, who, for all practical purposes, treat and use this income as part of their own income. Exclusion of minor children's income from the income of their parents also leads to tax avoidance. The existing provisions of s. 64 with regard to clubbing of minors' income have also led to litigation between the IT Department and the assessees. The Bill, therefore, seeks to amend s. 64 of the IT Act to provide that all income of a minor is to be included in the income of his parent. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be declared by the minor after the asst. yr. 1992-93 or it is to be declared by his parents in whose hands it is taxable? Answer : Minor can declare his undisclosed income of 1992-93 or earlier assessment years. From asst. yr. 1993-94, his income is includible in the parent's income and he is not obliged to file a return himself. Only parents can declare the minor's income for asst. yr. 1993-94 or later. Question No. 4: Can undisclosed income be declared by the minor for the assessment year prior to 1992-93 in his own hands? Answer: Yes, for reasons given in question No. 3" 8. In view of the above provision for clubbing of minor's income, sub-s. (1A) of s. 64 of the Act inserted by the Finance Act, 1992, w.e.f. 1st April, 1993 provides that all income of a minor is to be included in the hands of either of the parents. However, certain exceptions are provided that where the income is derived by the minor from manual work or from any activity involving his skill, talent or specialized knowledge or experience will not be included in the income of his parent. It has also been provided that the income of minor will be included in the income of that parent whose total income is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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