TMI Blog1984 (10) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... dual for the purpose of assessment, did not derive income from any source liable to be taxed under the Act for the income-tax assessment year 1976-77. Two of the assessee's minor children, Venkata Ravindranath Tagore and Srikrishna Mohan, were admitted to the benefits of partnership in the firms known as (1) M/s. Goli Brothers, and (2) M/s. Goli Venkateswararao Co. of Vijayawada. The share income arising to the above-mentioned minors from their admission to the benefits of partnership in the two firms referred to above amounted to Rs. 13,795. The ITO included this in the assessment made on the assessee for the assessment year 1976-77 and taxed him on that income. As already stated, the assessee did not derive income from any source. On these facts, the assessee contended before the ITO that the provisions of s. 64(1)(iii) of the Act are not applicable. According to the assessee, the above provisions are inapplicable in a case where the assessee himself has no income in the status of an individual. In order that income arising to minor children of an individual from their admission to the benefits of partnership in a firm is included in the individual's total income, the individua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That being so, urged the learned counsel for the Revenue, the individual is liable to be taxed on the share incomes arising to the minor children on their admission to the benefits of a partnership in a firm. Learned counsel relied on the decision of this court in Sivalal Sogaji, In re [1983] 140 ITR 39. Sri Ch. Srirama Rao leading the arguments on behalf of the counsel appearing for the assessees initially submitted that the decision of this court in Sivalal Sogaji, In re [1983] 140 ITR 39 requires reconsideration, inasmuch as that was a decision of this court dismissing a writ petition at the admission stage, without considering the various aspects arising for consideration in the case. In any event, that decision is distinguishable, because, in that case, the individual in whose hands the share income arising to the minors was included has income from some sources, although it was far below the minimum liable to tax, whereas in the cases on hand, the assessees do not have income from any source whatsoever excepting the share income. That fact, urged the learned counsel, distinguishes the present cases. Learned counsel pointed out that the income arising to the minors from thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n attempt to compute the total income of the assessee is frustrated because of failure of income from any source to an assessee, s. 64 of the Act becomes inoperative. Learned counsel further pointed out that there is built-in-evidence in s. 64 of the Act itself that an assessee must have total income for the purpose of assessment under the Act before considering the question of including the share income arising to minor children. Our attention has been invited to Explanation I to s. 64(1) which provides that the share income arising to minor children can be included in the total income of that parent whose total income excluding the income referred to in s. 64(1)(iii) of the Act is greater for the purpose of assessment. This provision, according to the learned counsel, makes it clear that before the inclusion of the share income arising to minors under s. 64(1)(iii) of the Act, the ITO has to find out the total income of the parents of the minor children and ascertain whose total income is greater and then determine the situs of assessment. This provision, the learned counsel proceeded to urge, makes it unmistakably clear that there must be a total income, other than the income re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intended to check tax avoidance by persons through diversion of income to the members of their family. Prior to the Taxation Laws (Amendment) Act, 1975, the provisions of s. 64 dealt with the inclusion of income arising to a minor child from a partnership firm of which the assessee himself is a partner. There is no sanction to include the income arising to a minor child admitted to the benefits of a partnership in a firm of which the parent was not a partner. To plug the loophole, the Taxation Laws. (Amendment) Act, 1975, introduced s. 64(1)(iii) with effect from April 1, 1976, that is to say, with effect from the assessment year 1976-77. We have already referred to the provision, but for the sake of completeness, we may quote below the relevant provision : " 64. Income of individual to include income of spouse, minor child, etc.-(1) In computing the total income of any individual, there shall be included all such income as arises directly or indirectly-... (iii) to a minor child of such individual from the admission of the minor to the benefits of partnership in a firm ; " Thus, up to and in the assessment year 1975-76, the income arising to the minor children on their admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t whether they have total income liable for assessment under the Act, or they have no total income at all. On the plain language employed in the provisions of s. 64(1)(iii) of the Act, it is not possible to accept the contention that the Legislature missed the fire and failed to achieve the object of checking tax avoidance by the above amendment which became effective from April 1, 1976. The provisions contained in s. 64 of the Act form part of an indivisible scheme for the purpose of assessment in the hands of an assessee of income in respect of which he is assessable under the Act. The income so assessable in the hands of an assessee may be his own income or the income of any other person in respect of which the assessee is assessable under the provisions of the Act. Section 139(1) of the Act enjoins that every person, if his total income or the total income of any other person in respect of which he is assessable under the Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form. The categories of income specified in s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable for necessary consequences for the omission to declare such income. If the assessee could be held to be under an obligation to himself include in his return under the respective heads of income, the income falling under s.64 of the Act, it is futile to contend that the ITO cannot assess the assessee on the income, falling under s. 64(1)(iii) of the Act on the ground that apart from that income, the assessee has no other income. If pursuant to the obligation on the part of the assessee, the income arising to the minor children is declared in the return, the ITO is entitled to accept that return under s. 143(1) of the Act and no further proceedings will ensue. Whatever may be the position in law prior to April 1, 1972, regarding the assessee's obligation to include income under s. 64 of the Act, it is clear that after the amendment of the return with effect from April 1, 1972, the assessee cannot escape his obligation to include in his return the income falling under s. 64(1)(iii) of the Act. We derive full support for this view from the judgment of the Supreme Court in CIT v. Kochammu Amma [1980] 125 ITR 624 above referred. Dealing with the contention urged in the above cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate column providing that I income arising to spouse/minor child or any other person as referred to in Chap. V of the Act should be shown separately under that column and consequently there is no longer any scope for arguing that the assessee is not bound to disclose such income in the return to be furnished by him, we would have referred the present case to a larger Bench. But we do not propose to do so since the question has now become academic in view of the amendment in the form of the return carried out with effect from 1st April, 1972." In our opinion, the above observations provide a complete answer to the questions raised by the learned counsel for the assessees in these references. Once it is accepted that the assessee is under an obligation to himself declare in the return filed by him the income arising to his minor sons on their admission to the benefits of partnership in a firm, no further consideration becomes relevant. It would be immaterial whether such an assessee has income from any other source under the Act. In the first place, the income, although derived by his minor children, is held to be " his income " and an obligation is imposed on the assessee un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of s. 64(1)(iii) of the Act empower the ITO to include the share income arising to the minor children of an individual on their admission to the benefits of partnership in a firm under s. 64(1)(iii) of the Act, in the total income of such individual assessee, notwithstanding the fact that the total income of such individual assessee is either less than the minimum liable to tax or that such an individual has no total income at all from any source other than the income under s. 64(1)(iii) of the Act. We hold that the assessments made by the ITO were correct and the Tribunal was in error in coming to the conclusion that such incomes are not liable to be taxed in the hands of the assessee. We, accordingly, answer the question referred to us in the negative, that is to say, in favour of the Revenue and against the assessee. We, however, direct the parties to bear their own costs. Advocate's fee Rs. 300. Sri M. J. Swamy, learned counsel for the assessee, makes an oral application for leave to appeal to the Supreme Court. We do not think that this is a fit case for grant of leave to appeal to the Supreme Court under s. 261 of the Act. In coming to the conclusion that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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