Commissioner of Income Tax vs M. Nallakamu Chettiar

K.A. Thanikkachalam, J.—At the instance of the Department, the Tribunal referred the following two common questions for the assessment

years 1974-75, 1975-76 and 1977-78, for the opinion of this court, u/s 256(1) of the Income Tax Act, 1961 :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the share income arising to

the minor sons by virtue of their admission to the partnership firm cannot be included in the individual assessment of the assessee u/s 64(1)(iii) of

the Income Tax Act, 1961, for the assessment years 1974-75, 1975-76 and 1977-78 ?

Whether the Appellate Tribunal''s further finding that the provisions of section 64(1) cannot be invoked to include the minors'' income, if the

parent has no income of his own as ''individual'' is sustainable in law and is based on a proper appreciation of the provisions of section 64 as

amended by the Taxation Laws (Amendment) Act with effect from April 1, 1976 ?

So far as the first question is concerned, the point for consideration is, whether the share income arising to the minor sons by virtue of their

admission to the benefits of the partnership-firm can be included in the individual assessment of the assessee u/s 64(1)(iii) of the Income Tax Act,

1961, for the assessment years 1974-75, 1975-76 and 1977-78. In so far as the first question relating to the assessment years 1974-75 and

1975-76 is concerned, the point arises before the amendment to section 64 by the Taxation Laws (Amendment) Act, 1975, with effect from April

1, 1976. In Commissioner of Income Tax, Ludhiana, etc.etc. Vs. Shri Om Prakash, etc.etc., , the Supreme Court held that income accruing to the

wife and minor sons cannot be included in the individual assessment of husband or of the Hindu undivided family, u/s 64(1)(ii) of the Income Tax

Act, 1961, prior to the 1976 amendment.

After the assessment year 1976-77, i.e., for the assessment year 1977-78, in the present case, the position is that the income arising to the

minor sons of the assessee as a result of their admission to the benefits of a partnership is liable to be included in the total income of the assessee

u/s 64(1)(iii) of the Act, notwithstanding that the assessee has no income of his own from any source whatsoever. Therefore, in so far as the first

question is concerned relating to the assessment years 1974-75 and 1975-76, it is answered in the affirmative and against the Department.

In so far as the assessment year 1977-78 is concerned, the question referred to us is answered in the negative and in favour of the Department.

In so far as question No. 2 is concerned, it relates to the application of the provisions of section 64(1) of the Income Tax Act, 1961. The

Tribunal''s finding that the provisions of section 64(1) cannot be invoked to include the minors'' income, if the parent has no income of his own as

individual, is not sustainable in law in view of the amendment brought about to section 64 of the Act by the Taxation Laws (Amendment) Act,

1975, with effect from April 1, 1976, and in view of the decision of this court in CIT v. P. Alwarsamy [1995] 211 ITR 353 wherein it was held

that the income arising to the minor sons of the assessee as a result of their admission to the benefits of partnership was liable to be included in his

total income u/s 64(1)(iii) of the Income Tax Act, 1961, notwithstanding that the assessee had no income of his own from any source whatsoever.

Accordingly, we answer this second question referred to us in the negative and in favour of the Department. No costs.