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Arun Kumar Sarraf Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 232 of 1972
Judge
Reported in[1976]104ITR90(All)
ActsIncome Tax Act, 1961 - Sections 64 and 66
AppellantArun Kumar Sarraf
RespondentCommissioner of Income-tax
Appellant AdvocateS.B.L. Srivatsava, Adv.
Respondent AdvocateDeokinandan, Adv.
Excerpt:
- - 6. the share income of the minor assessee from the firms has been included in the total income of his father and mother under section 64(2) of the income-tax act, 1961, for rate as well as for tax purposes......section 64 of the income-tax act, 1961, could be included in the other income of the assessee for rate purposes ?' 2. the question relates to the assessment years 1968-69 and 1969-70. arun kumar, the assessee, was a minor. he was admitted to the benefits of partnership in the following three firms : 1. m/s. krishna lal rishikesh. 2. m/s. parrnanand stores. 3. m/s. sarraf brothers. in the firm, m/s. krishna lal rishikesh, the assessee's father, sri rishikesh, was a partner. in the firm, m/s. parmanand stores, the assessee's mother was a partner. the assessee's share of profit in the first firm was included in the total income of his father and taxed as such. similarly, the minor's share income from the second firm was included in the income of his mother and taxed there under section.....
Judgment:

Satish Chandra, J.

1. The Tribunal has referred the following question of law for the opinion of this court:

'Whether, on the facts and in the circumstances of the case, the share income of the assessee from the firms, M/s. Krishna Lal Rishikesh and M/s. Parmanand Stores, which had been taxed in the hands of his father and mother, respectively, who were partners in these firms under Section 64 of the Income-tax Act, 1961, could be included in the other income of the assessee for rate purposes ?'

2. The question relates to the assessment years 1968-69 and 1969-70. Arun Kumar, the assessee, was a minor. He was admitted to the benefits of partnership in the following three firms :

1. M/s. Krishna Lal Rishikesh.

2. M/s. Parrnanand Stores.

3. M/s. Sarraf Brothers.

In the firm, M/s. Krishna Lal Rishikesh, the assessee's father, Sri Rishikesh, was a partner. In the firm, M/s. Parmanand Stores, the assessee's mother was a partner. The assessee's share of profit in the first firm was included in the total income of his father and taxed as such. Similarly, the minor's share income from the second firm was included in the income of his mother and taxed there under Section 64 of the Income-tax Act, 1961.

3. The minor-assessee returned incomes of Rs. 2,141 and Rs. 5,293 for the assessment years 1968-69 and 1969-70, respectively, from the third firm, namely, M/s. Sarraf Brothers. In this firm neither the father nor the mother of the minor assessee was a partner.

4. The Income-tax Officer added the assessee's share income from the first two firms in the total income of the minor assessee for rate purposes. On appeal the Appellate Assistant. Commissioner deleted the addition of the share income from the first two firms in computing the total income of the minor assessee for the years 1968-69. Since the balance of the income fell below the taxable limit, thee assessment was annulled. The Commissioner (sic) hold that Section 86 of the Income-tax Act, 1961, does not lay down that the income of a minor which had been subjected to assessment in the hands of his father and mother both for purposes of rate and tax is includible once again in computing the total income of the minor. He, however, dismissed the assessee's appeal in respect of the year 1969-70.

5. Feeling aggrieved, both parties filed cross-appeals before the Tribunal. The Tribunal held that there was no specific provision in the Income-tax Act, 1961, exempting the share of the minor from being included for rate purposes in his income, even though it has been taxed in the hands of his father or mother. Such share income was exempt from being taxed by reason of a fiction, fn view of Section 2(45) read with Section 5 of thy Act 'total income' would include income from whatever source it accrued. Sections 66, 86 and 110 of the Act were also not applicable. The Tribunal relied upon its earlier order in the case of Anil Kumar in I.T.A. No. 16099 of 1967, decided on 4th April, 1968. It held that the share income of the minor from the first two firms was liable to be included in the income of the minor assessee for rate purposes. At the instance of the assessee the Tribunal has referred the question of law mentioned above for our opinion.

6. The share income of the minor assessee from the firms has been included in the total income of his father and mother under Section 64(2) of the Income-tax Act, 1961, for rate as well as for tax purposes. The department's case is that the share income of the minor assessee continues to be his income and is includible in his total income for rate purposes.

7. Section 2(45) of the Income-tax Act, 1961, defines 'total income' to mean the total amount of income referred to in Section 5, computed in the manner laid down in this Act. Section 5(1) provides that:

'5(1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which-

(a) is received or is deemed to be received in India in such year by or on behalf of such person.'

8. Under this provision all income received by a person is liable to be included hn his total income subject to the provisions of this Act. Chapter VI of the Income-tax Act, 1961, provides for aggregation of income. Section 66 says that in computing the total income of an assessee there shall be included all income on which no income-tax is payable under Chapter VII. Chapter VII specifies the kinds of income on which income-tax is not payable by an assessee. For instance, under Section 86, income-tax is not payable in respect of share of profit from an unregistered firm on which tax is payable by the firm; and share of profit from an association of persons on which the tax has already been paid by the association. In view of Section 66 such income on which no income-tax is payable under Chapter VII can alone be included in the total income of the assessee. The share income of a minor assessee covered by Section 64 is not an income on which no tax is payable under Chapter VII. Therefore, such income cannot be aggregated or included in the total income of the minor-assessee under Section 66. There is no other provisionunder the Income-tax Act; for aggregation of Income for rate purposes. If any particular income is not covered by Section 66, it cannot, in our opinion, be included in the total income for rate purposes.

9. The Tribunal held that even though the minor's income was included in the total income of Ms father under Section 64(2), it none the less continued to be the income of the minor for all purposes. If that be so, then the share income in dispute may have been included in the total income of the minor-assessee for the purposes of tax. But that has not been done. The income can be included in the total income of an assessee for rate purposes only under Section 66. This provision applies to specified categories of income. An income which is outside the purview of Section 66 cannot be aggregated for rate purposes.

10. Accordingly, we answer the question referred to us in the negative, in favour of the assessee and against the department. The assesses will be entitled to costs which we assess at Rs. 200. The fee of the learned counsel for the department is also assessed at the same figure.


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