TMI Blog2003 (10) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that no income had escaped assessment so as to attract section 147/148?" - All the questions are answered in the negative, i.e., in favour of the Department and against the assessee - - - - - Dated:- 24-10-2003 - Judge(s) : S. H. KAPADIA., M. M. GHILDIYAL. JUDGMENT The judgment of the court was delivered by S.H. KAPADIA C.J.-The above two appeals raise a common question of law and, therefore, both the appeals are heard together and disposed of by this common judgment. Both the appeals are filed by the assessee. They pertain to the assessment year 1980-81. For the sake of convenience, we are mentioning hereinbelow the facts in Income-tax Appeal No.2 of 2003. Facts: The appellant, Manik Chandra, is an individual. For the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 143(3) of the Income-tax Act. However, the assessment was reopened on March 21, 1988, with an order under section 143(3)/148 of the Income-tax Act and the said income of Rs. 1.12 lakhs was assessed in the hands of the assessee under Explanation 2A to section 64(1)(iii) on the ground that the said income of Rs. 1.12lakhs had to be clubbed with the income of the assessee in respect of the assessment year 1980-81. Being aggrieved by the order of reassessment dated March 21, 1988, the assessee went in appeal before the Commissioner of Income-tax (Appeals). By order dated February 5, 1996, the learned Commissioner of Income-tax (Appeals) took the view that the minors had no right to receive the income of the trust till the age of 18. The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were created for the benefit of the minor(s). He argued that during the assessment year 1980-81, Ruchi and Nidhi were minors. That under the trust deeds income was to be accumulated till the minor attains the age of majority. That the trust were partners in the two firms respectively. That the trust funds amounting to Rs. 7,500 in each case was invested in the respective firms. He invited our attention to the various clauses of the said two trust deeds. He contended that in order to attract Explanation 2A to section 64(1)(iii) income should accrue to the minor(s) during the assessment year in question. That no income accrued to the minor(s) during the assessment year in question and therefore Explanation 2A to section 64(1)(iii) is not at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year in question and only payment was deferred till the minor(s) attained the age of 18 and therefore Explanation 2A to section 64(1)(iii) was applicable to the facts of this case. He contended that the right to receive income vested in the minor(s) during the assessment year in question. That the share of the minor(s) under the trust deed was specific and not indeterminate and therefore the income of Rs. 1.12 lakhs was taxable in the hands of the assessee. He contended that the various judgments cited on behalf of the assessee did not apply to the facts of the present case because in the present case under the trust deed it has been stipulated that in the event of death of the minor(s) before reaching 18 years would result in devolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Department and against the assessee. Findings: Under section 64(1)(iii), income arising to a minor from admission to the benefits of partnership, is included in the total income of that parent who has higher income, although neither of the parents is a partner in the firm to the benefits of which the minor is admitted. To counter the device, the Finance Act, 1979, inserted Explanation 2A to provide that where a minor is a beneficiary under a trust and the trust is a partner in the firm, the income arising to the trust shall be deemed to arise indirectly to the minor and to that extent such income will be included in the total income of that parent who has the higher income. In this case, Rs. 7,500 was settled in favour of each tru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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