B. Sudershan Reddy, J.
1. The Commissioner of Income-tax, Andhra Pradesh-I, Hyderabad, required the Income-tax Appellate Tribunal, Hyderabad Bench 'A', to refer the following common question, said to be a question of law arising out of the Tribunal's order dated April 9, 1991, in I. T. A. Nos. 194 to 202/Hyd of 1988, for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law/in holding that the share income of the assessee's minor children was assessable in the firm under Section 182(3) of the Income-tax Act and that it could not be included in the hands of the non-resident assessee in his individual assessment under Section 64(1)(iii) of the Act ?'
2. Master Rajesh Kumar and Master Kartik Kumar, minor sons of B. Narasimha Rao, have been admitted to the benefits of partnership in the firm of B. Rajesh and Company, Hyderabad. The said B. Narasimha Rao and his two minor children were, at the relevant time, residing in United States of America and treated as 'non-residents' for the purpose of the Indian Income-tax Act, 1922.
3. The Income-tax Officer assessed the share income of the minors derived from the firm in the hands of the parent (assessee) under Section 64(1)(iii) of the Income-tax Act, 1961 (for short 'the Act'). The assessee preferred appeals challenging the correctness of the order passed by the Income-tax Officer. The Appellate Assistant Commissioner of Income-tax, 'A' Range, Hyderabad, vide his orders dated October 28, 1987, allowed the said appeals. The Revenue preferred the appeals before the Income-tax Appellate Tribunal, Hyderabad Bench 'A'.
4. The Tribunal after an elaborate consideration of the matter concurred with the view taken by the Appellate Assistant Commissioner and accordingly dismissed the appeals preferred by the Revenue.
5. The Tribunal relied upon Section 182(3) of the Act and came to the conclusion that if any of the partners of the firm is a non-resident, the assessment is to be made on the firm and the tax recovered from the firm itself. The Tribunal, relying upon Section 2(23) of the Act, came to the conclusion that the minor who has been admitted to the benefits of partnership is also to be treated as a partner. The Tribunal by reading the said two provisions together came to the conclusion that in the case of a non-resident minor partner, the assessment has to be made on the firm and tax also has to be recovered from the firm itself.
6. In the result, the Tribunal took the view that the share income of the minors could not be included in the hands of the assessee, non-resident, in his individual assessment under Section 64(1)(iii) of the Act. Section 64(1)(iii) of the Act as such is not applicable is the conclusion reached by the Tribunal.
7. Sri S. R. Ashok, learned senior standing counsel for the income-tax, submits that the order of the Appellate Assistant Commissioner as well as the order of the Appellate Tribunal is erroneous on facts and in law. It is contended that the provisions of Section 182(3) of the Act are procedural in nature and the same cannot override the provisions of Section 64(1)(iii) of the Act, which is a substantive provision. It is also contended that Section 182(3) of the Act refers to the partner of a firm, who is a non-resident and not the minor who was admitted for the benefit of partnership firm. The learned senior standing counsel contends that the decision reported in CIT v. Naraindas Dwarkadas : 102ITR767(Bom) has no application to the facts on hand.
8. Learned counsel for the assessee contends that the order passed by the Tribunal is not vitiated for any reason requiring any correction as such by this court. It is submitted by learned counsel that Section 182 is a special provision relating to non-residents and the same excludes the operation of Section 64(1)(iii) of the Act being a special provision. It is submitted that the special provision always excludes the general provision.
9. In order to consider the rival submissions, it is imperative to notice under Section 64(1)(iii) of the Act, as it stood prior to its omission by the Finance Act, 1992, with effect from April 1, 1993 :
'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 ; . . .'
10. A plain reading of this provision would make it clear that it does not make any difference between a resident and non-resident. It is a substantive provision mandating as to how an individual's income is to be computed and directs that the income of the individual to include income of the spouse, minor child, etc.
11. It is very well settled and needs no reiteration in our hands that a general statute or a general provision applies to all persons within its jurisdiction and scope as distinguished from a special one, which in its operation is confined to a particular locality or a particular group of persons or class of cases. A law, which is essentially general in nature, may also contain special provisions on certain matters and in respect of those matters it would be classified as a special law.
12. Section 182, as it stood at the relevant time, no doubt, is a part of Chapter XVI containing special provisions applicable to firms. Section 182 of the Act dealt with assessment of registered firms. It would be relevant to notice the said provision :
'182. Assessment of registered firms.--(1) Notwithstanding anything contained in Sections 143 and 144 and subject to the provisions of Sub-section (3), in the case of a registered firm, after assessing the total income of the firm, --
(i) the income-tax payable by the firm itself shall be determined ; and
(ii) the share of each partner in the income of the firm shall be included in his total income and assessed to tax accordingly.
(2) If such share of any partner is a loss, it shall be set off against his other income or carried forward and set off in accordance with the provisions of Sections 70 - 75.
(3) When any of the partners of a registered firm is a non-resident, the tax on his share in the income of the firm shall be assessed on the firm at the rate or rates which would be applicable if it were assessed on him personally, and the tax so assessed shall be paid by the firm . . .'
13. A plain reading of the above provision makes it clear that it provides for the procedure for assessment and by itself does not confer any substantive right. As rightly contended by learned senior standing counsel it merely provides the procedure and mechanism for the realisation and recovery of tax from the partners of a registered firm, who are non-residents. The tax is required to be paid by the registered firm. It provides that the tax on the share of a non-resident partner of a registered firm and his income out of his share in the firm shall be assessed on the firm itself at the rate or rates, which would be applicable if it were assessed on him personally. Obviously, it is a mechanism provided to ensure speedier recovery of tax making the firm itself liable to pay the tax as provided for in Sub-section (3) of Section 182.
14. The question is not as to whether the said provision is a special provision. May be it is a special provision providing mechanism for the purpose of recovery and realisation of tax in the case of non-resident partners of a registered firm. The question is as to whether it is a substantive provision or a procedural one. It does not in whatsoever manner exclude the operation of Section 64 of the Act. Section 64 of the Act specifically provides that in computing the total income of any individual, there shall be included all such income as arises directly or indirectly and mandates that such income of the individual to include the income of the spouse, minor child, etc., even after admission of the minor child of such individual to the benefits of partnership in a firm.
15. It is clear from the reading of Section 182 itself that a non-resident Indian is not intended to be treated as a substantive separate class. There is no separate scheme as such. There is no distinction as such between a non-resident major and a resident major for the purpose of assessment. With the same parity of reasoning it is clear that Parliament never intended to treat a non-resident minor differently from that of a resident minor for the purposes of computing the total income of an assessee.
16. For the aforesaid reasons, we are of the considered opinion that, in the facts and circumstances of the case, the Income-tax Appellate Tribunal was not justified in law in holding that the share income of the assessee's minor children was assessable in the firm under Section 182(3) of the Act. The share income of the assessee's minor children ought to have been included in the hands of the non-resident assessee in his individual assessment under Section 64(1)(iii) of the Act.
17. The question posed for our opinion is accordingly answered in favour of the Revenue and against the assessee. No order as to costs.