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indumai Manoharlal and Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberI.T.R.C. Nos. 34 and 104 of 1982
Judge
Reported in(1987)60CTR(Kar)74; [1987]163ITR750(KAR); [1987]163ITR750(Karn); [1986]26TAXMAN464(Kar)
ActsIncome Tax Act, 1961 - Sections 64(1)
Appellantindumai Manoharlal and ;manibhai Prahladri
RespondentCommissioner of Income-tax
Appellant AdvocateS.P. Bhat, Adv.
Respondent AdvocateK. Srinivasan, Adv.
Excerpt:
.....over the entire extent of land as pleaded by the plaintiff itself is doubtful and not a thing which is proved. the suit for recovery of possession therefore inevitably fails. - bhat, learned counsel for the assessee, placed reliance is clearly distinguishable on facts and, therefore, that decision is not applicable to the present case......includible in the total income. the income-tax officer rejected that claim and brought to tax the share income of the minors in the hands of the assessee. 2. the assessee appealed and succeeded. the commissioner of income-tax (appeals) found from the partnership deed that from october 1, 1975, the said two minors had ceased to be partners for the benefits of the partnership and what they were entitled to when the books were closed on march 31, 1976, was not by the terms of partnership deed but by a separate agreemetnt. accordingly, he held that the additions cannot be sustained and allowed the appeal of the assessee. 3. the revenue appealed to the tribunal. the tribunal reversed the order of the commissioner. the tribunal observed that there was credit to the accounts of the minor.....
Judgment:

Jagannatha Shetty, J.

1. Under section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following common question in these two reference :

'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the income received by the minor children from the firm is income of the assessee under section 64(1)(iii) of the Income-tax Act, 1961, for the assessment year 1976-77 ?'

The facts behind the question are :

The assessee is an individual and the accounting year ended on March 31, 1976, for the assessment year 1976-77. Her two minor children were admitted to the benefits of the partnership in the firm of M/s. Mysore Ammonia Supply Corporation, Baroda, and another firm. They ceased to be partners with effect from October 1, 1975. Accordingly, a new partnership deed was entered into thereafter. However, at the instance of the assessee, the profit and loss account was prepared for the year ended on March 31, 1976. In that accounting result, the two minors were given Rs. 22,485 each. The assessee declared the sum of Rs. 44,970 in part-III of the return and claimed that it was not includible in the total income. The Income-tax Officer rejected that claim and brought to tax the share income of the minors in the hands of the assessee.

2. The assessee appealed and succeeded. The Commissioner of Income-tax (Appeals) found from the partnership deed that from October 1, 1975, the said two minors had ceased to be partners for the benefits of the partnership and what they were entitled to when the books were closed on March 31, 1976, was not by the terms of partnership deed but by a separate agreemetnt. Accordingly, he held that the additions cannot be sustained and allowed the appeal of the assessee.

3. The Revenue appealed to the Tribunal. The Tribunal reversed the order of the Commissioner. The Tribunal observed that there was credit to the accounts of the minor partner and it was their share of profit and that would not have accrued to them but by reason of their continuing as partners. The share of profit although determined and received at the close of the accounting year could not, therefore, be excluded under section 64(1)(iii) of the Act.

4. In our opinion, the view taken by the Tribunal is justified. Section 64(1)(iii) provides :

'64.(1) In computing the total income of any individual, there shall be included all such income as arises directly ir indirectly - ......

(iii) to a minor child of such individual from the admission of the minor to the benefits of partnership in a firm.'

5. It is not in dispute that the minors were admitted to the benefits of the partnership and they received the share income from the period up to their continuance in that partnership. Section 64(1) of the Act directs that in computing the total income of any individual, the income arising directly or indirectly to a minor to the benefits of partnership in a firm shall be included in computing the total income of that individual. It is immaterial whether the share income was received by the minors on the date on which they discontinued as partners or on the date when the books of account were closed. So long as it is not in dispute that what they received was the share of profit which they were legitimately entitled to as minors admitted to the benefits of the partnership, the operation of section 64(1)(iii) cannot be excluded. There is, therefore, no scope for exclusion of their share income in computing the total income of the assessee.

6. The decision of the Supreme Court in CIT v. Ashokbhai Chimanbhai : [1965]56ITR42(SC) , on which Mr. Bhat, learned counsel for the assessee, placed reliance is clearly distinguishable on facts and, therefore, that decision is not applicable to the present case.

7. In the result, we answer the question in the affirmative and against assessee.

8. No costs.


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