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TMI Blog1956 (8) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... ui juris. Under the provisions of section 16(3)(a)( ii) Rajasekhara's share ₹ 10,143 was included in computing the total income of Marimuthu. But the assessee was granted earned income relief only on the basis of his own share, ₹ 12,344. The assessee's contention, that earned income relief should be calculated also with reference to the share income of his minor sons, was negatived by the departmental authorities. That was confirmed by the Tribunal. A consolidated reference was made for both the assessment years, and the question referred to this Court under section 66(1) of the Act ran: "Whether the assessee is entitled to earned income relief on the share income of the two minor sons for 1949-50 assessment year and on the share income of the one minor son for 1950-51 assessment year included in the computation of the total income of the assessee under the provisions of section 16(3)(a)( ii) of the Income-tax Act". The liability of the assessee for the inclusion of the income of his minor sons in computing his total income under the provisions of section 16(3)(a)(ii ) was never in dispute, though it was found that the capital that was contributed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm, of which the assessee was a partner, and of which he was in general management, was not in dispute either. In the case of a firm, the test prescribed by section 2(6AA)(b) is that the assessee should be a partner actively engaged in the conduct of the business. That test the assessee obviously satisfied, because the assessee, Marimuthu, was a partner of the firm and he was actively engaged in the conduct of the business of the firm. Had section 2(6AA)(b) stood by itself, without the concluding portion of section 2(6AA), the tests to be satisfied would have been (1) the income must be that of the assessee, (2) that the income should be chargeable to tax under the head profits and gains of business, and (3) in the case of those profits and gains of business having been earned by a firm, the assessee should be a partner actively engaged in the conduct of the business. Obviously the first of these tests cannot be satisfied, where the income of another person is included in the income of the assessee for purposes of computation of the assessee's total income or of its assessment to tax. Therefore in construing the scope of the expression "such income" in the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which though it is the income of another person', it would appear that the income of such other person should possess the characteristics previously mentioned, one of which is that the income should be derived from personal exertion. From this it would follow that if the wife were merely a dormant partner, her share of the partnership profits would not be earned income, though it might be included in the total income of the husband. To the argument, for proving the contrary, that if the wife were an active partner, her income would be earned income without any more mention, the answer is afforded, that since the wife is not an assessee quoad that income, a specific provision was rendered necessary that if her share of the profits were otherwise earned income, it should not cease to be such merely because she was not assessed, but her husband was. If the husband were also an active partner, both the shares would be earned income. If the husband were a dormant partner, but the wife were an active partner, the wife's income would be assessed in the husband's hands, but as earned income". To similar effect were the views of Mr. V.S. Sundaram expressed in his Law of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of section 44D (which is one of the classes of cases where the income of one person is deemed to be the income of another) precludes the construction that the activity posited in the case of income falling within the "inclusive" portion of the definition in section 2(6AA) is that of some person other than the assessee. Sub-sections (1) and (2) of section 44D which are relevant in the present context run : "44-D. (1) Where any person has, by means of a transfer of assets, by virtue or in consequence whereof, either alone or in conjunction with associated operations, any income which if it were the income of such person would be chargeable to income-tax becomes payable to a person not resident or to a person resident but not ordinarily resident in the taxable territories, acquired any rights by virtue or in consequence of which he has within the meaning of this section power to enjoy such income, whether forthwith or in the future, that income shall, whether it would or would not have been chargeable to income-tax apart from the provisions of this section, be deemed to be income of such first mentioned person for all the purposes of this Act. (2) Where any person ..... X X X X Extracts X X X X X X X X Extracts X X X X
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