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Vinodkumar Ratilal Vs. Commissioner of Income-tax, Gujrat Ii - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 41 of 1972
Judge
Reported in[1975]100ITR564(Guj)
ActsPartnership Act - Sections 42; Income Tax Act, 1961 - Sections 4(1), 18, 27, 38, 64 and 64(1)
AppellantVinodkumar Ratilal
RespondentCommissioner of Income-tax, Gujrat Ii
Appellant Advocate J.P. Shah, Adv.
Respondent Advocate K.H. Kaji, Adv.
Cases ReferredExecutors and Vestey v. Commissioners of Inland Revenue. Lord Normand
Excerpt:
(i) direct taxation - cause of action - whether certain sum being aggregate of share of wife liable to be included in assessee's total income and liable to be assessed - when partnership-firm dissolved on death of assessee right of his widow to receive his profits cannot accrue in her capacity as wife - in view of precedent amount not liable to be included in total income of assessee. (ii) benefits - section 64 (1) (ii) of income tax act, 1961 - under section 64 (1) (ii) income of share of profits arises to minor child of assessee from admission of minor to benefits of partnership and liable to be included in benefits. - - and where any such income is once included in the total income of either spouse or parent, any such income arising in any succeeding year shall not be included in.....divan, c.j. 1. in this reference made at the instance of the assessee the following question has been referred to us : 'whether, on the facts and in the circumstances of the case, the sum of rs. 13,600, being the aggregate of the share of the wife and minor allocated to them up to july 1, 1963, was liable to be including in the assessee's total income for samvat year 2019 and liable to be assessed in the hands of the assessee in the assessment year 1964-65 ?' 2. the assessee in this case, ratilal ranchhoddas, died on july 1, 1963, and in the income-tax proceedings the assessee's estate has been represented by the hair and legal representative of the deceased, ratilal ranchhoddas. the relevant assessment year is 1964-65. the deceased assessee was a partner in a two firms : (1) messrs......
Judgment:

Divan, C.J.

1. In this reference made at the instance of the assessee the following question has been referred to us :

'Whether, on the facts and in the circumstances of the case, the sum of Rs. 13,600, being the aggregate of the share of the wife and minor allocated to them up to July 1, 1963, was liable to be including in the assessee's total income for Samvat Year 2019 and liable to be assessed in the hands of the assessee in the assessment year 1964-65 ?'

2. The assessee in this case, Ratilal Ranchhoddas, died on July 1, 1963, and in the income-tax proceedings the assessee's estate has been represented by the hair and legal representative of the deceased, Ratilal Ranchhoddas. The relevant assessment year is 1964-65. The deceased assessee was a partner in a two firms : (1) Messrs. Ranchhoddas Bhaichand & Co. and (2) Messers. Ranchhoddas Bhaichand (Grain Dept.) and both these firms were being assessed at Bombay. The previous year for the two firms relevant for the assessment year 1964-65 was the Samvat Years 2019 (October 29, 1962, to October 17, 1963). In both these firms the assessee's wife, Lilavati, was also partner in two minor sons of the assessee, Kirankumar and Sanjaykumar, were admitted to the benefits of the partnership. The assessee died on July 1, 1963, that is, more than three months before the end of the relevant previous year which ended on October, 17, 1963. Both these partnership firm were constituted under instruments of the partnership both dated November 26, 1959. The partner included the assessee and his wife, where has the three minor sons of assessee, namely, Vinodkumar, Kirankumar and Sanjaykumar, were admitted the benefit the benefit of the partnership. The business of the partnerships was to be closed at the end of every Hindu year, that is, also Vad 30, and the profits of the allocated on Also Vad 30 as per the profits sharing ratio maintained therein. It appears that Vinodkumar, the eldest sons of the deceased, become a major in 1962, and January 22, 1962 two supplemental deed of partnership were executed to recognize the fact that Vinodkumar has ceased to be a minor and had opted for being taken up as a partner and the shares of the partners were adjusted by the supplemental deeds of the partnership of January 22, 1962. The deceased-assessee expired on July 1, 1963, and after his death on September 28, 1963, new partnership deeds were executed bring in to existence two partnership firm with effect from July, 2, 1963. The partnerships which were constituted after the death of the deceased were to continue their business under the same name as before the date of death of the deceased and it was also recorded in the new deeds of the partnership that Lilavati, the widow of the deceased, had expressed a desire to retire from the partnership.

3. On the death of the deceased, the account books of the two firms were not closed and the profits or loss till the death had not been worked out but at the end of Samvat Year 2019, the entire profits as ascertained at the end of Samvat Year 2019 was allocated to the two periods, namely, (1) October 29, 1962, to July 1, 1963, and (2) July 2, 1963, to October 17, 1963. The profits for the year were allocated in the two periods in the time basis and, thereafter, they were allocated amongst the various partners and the minors admitted to the benefits of the partnership in their profit-sharing ratio. In making the assessment on the total income of the assessee for the accounting year Samvat Year 2019, that is, assessment year 1964-65, the Income-tax Officer included the share of profit of the assessee's wife and the share of profits allocated to the minor children for the period ending July 1, 1963, and he did so purporting to act under the provisions of sections 64 of the income-tax Act, 1961. The matter was than carried in appeal before the Appellate Assistant Commissioner and the contention of the assessee was turn down and it was held that the profit coming to the wife's share for the period ending July 1, 1963, and the share of the profit coming to the minor children for the period up to July 1, 1963, was includible in the income of the deceased-assessee. The matter was them taken in further appeal to the Tribunal but the Tribunal also turned down the contention of the assessee. The Tribunal held that, as the income of the deceased was to be determined till July 1, 1963, that is, the date of death of the deceased, the share of the profit which accrued to the wife and the minor children till this date were to be included own the income of the assessee. The Tribunal held that the profits till July 1, 1963, were to be included in the assessment of the deceased under section 64 of the Income-tax Act, 1961. Thereafter, at the instance of the assessee, the question hereinabove set out j] has been referred to us for our opinion.

4. In order to appreciate the contention urged at the Bar and also in order to understand the several authorities which have been relied upon on the course of the Indian Income-tax Act, 1922. Prior to 1937, there was no provisions similar to section 64 of the Income-tax Act, 1961. By the Indian Income-tax (Amendment) Act, 1937 (Act 4 of 1937) section 16 (3) was inserted in the Act of 1922 and under that section in computing the total income of any individual for the purpose of assessment, there shall be included, -

(a) so much of the income of a wife or minor child of such individual as arises directly of indirectly, -

(i) from the membership of the wife in a firm of which her husband is partner;

(ii) from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner;

(iii) from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart.

5. This provision of section 16 (3) continued on the statute book until the repeal of the Act of 1922 by Income-tax Act, 1961, and similar provisions were enacted in section 64 but with a slight difference. It may be pointed out that in Commissioner of Income-tax v. Sodra Devi the Supreme Court had held that the only intention of the legislature in enacting section 16 (3) of the Indian Income-tax Act, 1922, was to include the income derived by the wife or a minor child in the computation of the total income of the husband or the father, as the case may be, for the purpose of the assessment and the words 'any individual' and 'such individual' occurring in section 16 (3) of the Act were restricted in their connotation to mean only the male of the species, and did not include the female of the species. After this decision of the Supreme Court, when Parliament came to enact the Income-tax Act, 1961, a slight change was made in sub-section (1) of section 64 compared to clause (i) of section 16 (3) (a). Under the new section it is provided :

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

(i) to the spouse of such individual from the membership of the spouse in a firm carrying on business in which such individual is a partner;

(ii) to a minor child of such individual from the admission of the minor to the benefits of partnership in a firm in which such individual is a partner;

(iii) subject to the provisions of clause (i) of section 27, to the spouse of such individual from assets transferred directly or indirectly to the spouse of such individual otherwise than for adequate consideration or in connection with an agreement to live apart...'

6. The legislature also added a new Explanation to section 64 (1) which was not to be found under the Act of 1922. By virtue of this Explanation, for the purpose of clause (i) of section 64(1), the individual, in computing whose total income the income referred to in that clause is to be included, shall be the husband or wife whose total income (excluding the income referred to in that clause) is greater; and, for the purpose of clause (ii), where both the partners are members of the firm in which the minor child is a partner, the income of the minor child from the partnership shall be included in the income of that parent whose total income (excluding the income referred to in that clause) is greater; and where any such income is once included in the total income of either spouse or parent, any such income arising in any succeeding year shall not be included in the total income of the other spouse or parent unless the Income-tax Officer is satisfied, after giving that spouse or parent an opportunity of being heard, that it is necessary so to do. These are the departures in the scheme of the Act of 1961 from the scheme of the Act of 1922 so far as they are necessary to be noted for the purposes of this judgment.

7. The question as to when the income can be said to arise is required to be considered while applying section 64(1) because in all such cases the income must arise directly or indirectly to one or the other of the individuals referred to in the five different clause of section 64(1). The question was finally settled by the decision of the Supreme Court in E. D. Sassoon & Co. Ltd. v. Commissioner of Income-tax. At page 54, Bhagavati J., who delivered the majority judgment, has observed :

'It is no doubt true that the accrual of income does not depend upon its ascertainment or the accounts cast by the assessee. The accounts may be made up at a much later date. That depends upon the convenience of the assessee and also upon the exigencies of the situation. The amount of the income, profits or gains may thus may be ascertained later on the accounts being made up. But when the accounts are thus made up the income, profits or gains ascertained as the result of the accounts are referred back to the chargeable accounting period during which they have accrued or arisen and the assessee is liable to tax in respect of the same during that chargeable accounting period. `The computation of the profits whenever it may take place cannot possibly be allowed to suspend their accrual......'.'

8. It was further observed by Bhagwati J. at page 55 :

'What has, however, got to be determined is whether the income, profits or gains accrued to the assessee and in order that the same may accrue to him it is necessary that he must have acquired a right to receive the same or that a right to the income, profits or gains has become vested in him though its valuation may be postponed or though its materialisation may depend on the contingency that the making up of the accounts could show income, profits or gains.'

At page 63, it was observed :

'It is not the work done or the services rendered by the person but the income received or the income which has accrued to the person within the chargeable accounting period that is the subject-matter of taxation. That is the proper method of approach while considering the taxability or otherwise of income and no consideration of the work done for broken periods or contribution made towards the ultimate income derived from the source of income nor any equitable considerations can make any difference to the position which rests entirely on a strict interpretation of the provisions of section 4(1)(a) of the Income-tax Act.'

9. This decision in E. D. Sassoon & Co. Ltd. v. Commissioner of Income-tax was followed by the Bombay High Court in Bhogilal Laherchand v. Commissioner of Income-tax, and there the facts were that under under a partnership deed dated April 14, 1943, a father carried on a business in partnership with his sons some of whom were minors and were only admitted to the benefits of the partnership. One of the minors attained majority on the 20th August, 1950, and, as he elected to continue as a partner, a fresh partnership deed was executed on August 20, 1950. Under both partnership deeds accounts were to be taken and the profit or loss ascertained on the Divali day of each year. The minor son who attained majority died on August 31, 1950. The share of the deceased son in the profits as ascertained on August 31, 1950, was Rs. 2,64,450. The proportionate profits in this basis up to August 20, 1950, when the son attained majority, was Rs. 2,49,459, and the income-tax authorities included this amount in the assessment of the father under section 16 (3) of the Act of 1922 on the ground that this amount was income of a minor child of the assessee which arose from the admission of that minor to the benefits of the partnership. On these facts it was held by the Bombay High Court that, as the minor son had elected to remain a partner after attaining majority and the partnership continued, and under the terms of the partnership, profit or loss was to be ascertained only on the Divali of each year and it was impossible to predicate whether the partnership had made any profit or loss, on any date prior to the date of the Divali in any year, the deceased son had not acquired any right to receive the sum of Rs. 2,49,459 from the partnership at any time during the accounting year. The said amount could not be treated as income which 'arose' to him directly or indirectly within the meaning of section 16 (3) of the Act of 1922 in the accounting year, and could not, therefore, be included in the assessment of the father. It was pointed out by the Bombay High Court that though income may accrue or arise to him until he acquires a right to receive the same; and unless and until there is created in favour of the assessee debt due by somebody, it cannot be said that he has acquired a right to receive the income. The Division Bench addressed itself to the question as to what is the meaning of the expression 'as arises directly or indirectly as to what is the meaning of the expression' as arises directly or indirectly' occurring in section 16 (3) (a) and it was held that unless and until there is created in favour of the assessee a debt due by somebody, it cannot be said that he has acquired a right to receive the income, or that income has accrued to him. The son who died on August 31, 1950, was Arvind, and at page 927, Chagla C.J., delivering the judgment of the Division Bench, observed :

'The only debt that came into existence and with regard to which Arvind or rather his estate acquired a right to receive the payment was a debt which could only be ascertained on making up the accounts of the partnership as of the 31st August, 1950'

10. and it was held that, though the amount of Rs. 2,49,459 represented profits of the partnership to which Arvind as a minor was entitled, mere computation regarding this amount would not create a right which did not exist. It was held that the entire amount of Rs. 2,64,450 was received by Arvind or Arvind's estate when the accounts were made up as on August 31, 1950, by which date he had attained majority and, therefore, none of the amounts which was allocated to Arvind could be included in the total income of the father.

11. The next judgment in point of time which requires to be considered in this connection is the decision of the Supreme Court in Philip John Plasket Thomas v. Commissioner of Income-tax. The facts have to be stated in order to appreciate the two points which were decided by the Supreme Court in that case. T, the assessee, who held 750 'A' shares in a company, was engaged to be married to Mrs. J. K., a divorcee, and the engagement was announced on September 3, 1947. An application to transfer the shares was presented to the company on December 10, 1947, by the assessee and Mrs. J. K. The transfer deed ran as follows :

'I, T......... in consideration of my forthcoming marriage with J. K. (hereinafter called 'the said transferee') do hereby transfer the 750 'A' shares........... standing in my name in the books of the company......... to hold to the said transferee..... subject to the several conditions on which I held the same at the time of the execution thereof.......'

12. The company transferred the shares to Mrs. J. K. and registered her as the owner of the shares on December 15, 1947. The marriage was solemnised on December 18, 1947, and the fact of marriage was communicated to the company on January 26, 1948, and the name of the shareholder was changed in the books of the company to Mrs. J. T. The question was whether the income from the shares so transferred which arose to the assessee's wife could be included in the total income of the assessee under section 16 (3) (a) (iii) of the Indian Income-tax Act, 1922. On these facts the Supreme Court laid down two principles. While interpreting the provision of section 16 (3), S. K. Das J., delivering the judgment of the Supreme Court, observed at page 102 :

'On a plain reading of sub-section (3) of section 16 it seems clear to us that the time when the income accrues, it must be the income of the wife of that individual whose total income is to be computed for the purpose of the assessment; this seems to follow clearly from clearly from clause (a) of sub-section (3). Therefore, in a sense it is right to say that the relationship of husband and wife must subsist at the time of the accrual of the income; otherwise, the income will not be the income of the wife, for the word 'wife' predicates a marital relationship.'

13. Interpreting the provisions of sub-clause (iii) of section 16 (3) (a), it was observed at page 103 :

'......... Sub-clause (iii) predicates a further condition, the condition being that the income must be from such assets as have been transferred directly or indirectly to the wife by the husband. This condition must be fulfilled before sub-clause (iii) is attracted to a case. It is clear that all income of the wife from all her assets is not includible in the income of the husband. Thus, on a paper reading of section 16 (3) (a) (iii), it seems clear enough that the relationship of husband and wife must also subsist when the transfer of assets is made in order to fulfil the condition that the transfer is directly or indirectly to the wife by the husband.'

14. We are not concerned in the present case with the interpretation placed by the Supreme Court in Philip John Plasket Thomas's case on subclause (iii) of section 16 (3) (a) but the interpretation placed by the Supreme Court on the operation of section 16 (3) is very much material for the purpose of our judgment. It is important to bear in mind at this stage that under section 16 (3) (a) of the Act of 1922, the words were 'in computing the total income of any individual for the purpose of assessment, there shall be included so much of the income of a wife or minor child of such individual as arises directly or indirectly' whereas the language of section 64(1)(i) of Act of 1961 is 'in computing total income of any individual, there shall be included all such income as arises directly or indirectly to the spouse of such individual from the membership, etc.' Therefore, the interpretation which was placed by the Supreme Court on section 16 (3) (a) of the Act of 1922 is very much material for the purpose of interpreting section 64(1)(i) of the Act of 1961 and following that decision in Philip John Plasket Thomas's case it must be held that even for the purpose of section 64(1), clause (i), at the time when the income accrues to the spouse it must be the income of the spouse of that individual whose total income has to be computed for the purpose of assessment. The relation ship of husband and wife must subsist at the time of the accrual of the income; otherwise, the income will not be the income of the wife, for the word 'spouse' predicates a marital relationship. We have already pointed out the change in the language of section 64 of the Act of 1961 and the widening of the provisions as compared to the provisions of section 16 (3) of the Act of 1922 but that was only for the purpose of roping in the husband's income and including it in that of the wife in an appropriate case when read with the language of the Explanation to section 64(1). As we have pointed out, the change in the language was introduced by Parliament after the decision of the Supreme Court in Commissioner of Income-tax. v. Sodra Devi.

15. The principles which we have culled out from the different decisions referred to already have been reaffirmed by the Supreme Court in Commissioner of Income-tax v. Ashokbhai Chimanbhai and there the Supreme Court has held that profits do not accrue from day to day or even from month to month and have to be ascertained by a comparison of assets at two stated points. Unless the right to profits and comes into existence there is no accrual of profits and the destination of profits and destination of profits must be determined by the title thereto on the day on which they arise. In the case of a partnership, where the accounts are to made stated intervals, the right of a partner to demand his share of the profits does not arise until the contingency which by operation of law or under a covenant of the partnership deed gives rise to that, has arisen. It was also held in that case that the income becomes taxable on the footing of accrual only after the right of the taxpayer to the income accrues or arises, and in the case of an agreement which makes profits receivable at or on the happening of a contingency, the fact that the profits are the result of transactions spread over a period which covers a period preceding the happening of that contingency would not make the receipt liable to be paid to persons other than those who are entitled to receive it on the date on which it is actually received or became receivable. Income is said to be received when it reaches the assessee; when the right to receive the income becomes vested in the assessee, it is said to accrue or arise.

16. In the light of these principles we have to consider whether in the instant case the income which accrued to the wife as of July 1, 1963, was includible in the income of the assessee. It is clear from the facts stated by the Tribunal that it was by the virtue of the provisions of section 42 of the partnership Act that the firm was dissolved on the death of Ratilal Ranchhoddas, the deceased-assessee. There was no clause in the partnership deeds of November 26, 1959, regarding the continuance of the partnerships in spite of the death of one of the partners and, since there was no such contract to the contrary, the two partnership firms under consideration were dissolved by operation of law on the death of Ratilal Ranchhoddas, the deceased-assessee. It was his death which gave rise to the contingency on which the accounts became liable to be made up and it was his death which brought about the dissolution of the firms and hence it was his death which required the accounts to be made up and the profit as on July 1, 1963, was ascertained. Though the accounts were made up at the end of Divali, in fact the accounts up to the period July 1, 1963, were ascertained and allocated to the different persons entitled to profits in the two partnership firms. At the time of the death of Ratilal Ranchhoddas which gave rise to the dissolution of the firms, the marital relationship between the deceased and Lilavati also came to an end. From the moment of Ratilal's death, she ceased to be the wife. She became a widow and it is clear that the marital relationship ceased to subsist at the very moment of time when the right to receive the share of profits in the two firms accrued to Lilavati. The very event which gave rise to the dissolution of the two firms and hence to her right to receive shares in the profits as of July 1, 1963, also rendered her a non-spouse, a widow, and to use the language of the Supreme Court in Philip John Thomas's case, 'the material relationship' did not subsist at the time when the right to receive the profits accrued or arose in the case of Lilavati.

17. Mr. Kaji, on behalf of the revenue, has relied upon certain observations of Clauson L. J. in Commissioners of Inland Revenue v. Gaunt. There, while interpreting the provisions of section 38 of the Finance Act, 1938, the Court of Appeal held :

'.......... the difference, if difference there be for this purpose, between the words 'wife' and 'widow' is quite immaterial for the purposes of the section. Why in those circumstances, when a lady is referred to as 'the of so-and-so', it should be supposed that she ceases to hold the character indicated by that reference the moment her husband dies, I must confess I cannot understand. I should have thought it was perfectly clear that when the section refers to the possibility of the settlor's wife obtaining a benefit, it refers to the possibility of obtaining a benefit either during her husband's lifetime or afterwards; and it would be curious if it meant anything else.'

18. This decision of the Court of Appeal in the above case was not approved by the House of Lords in Lord Vestey's Executors and Vestey v. Commissioners of Inland Revenue. Lord Normand, in his speech, pointed out at page 91 of the report :

'I respectfully think that the Court of Appeal in Gaunt's case and the argument for the Crown in this case leave out of account the important consideration that sections 18 and 38 are income-tax sections, and that it is a principle of income-tax law, embodied in rule 16 of the General Rules, that for income-tax purposes a husband and wife living together are one. I see no reason to doubt that the purpose of the provisions in section 38, by which a benefit for the wife or husband of the settlor falls to be treated as a benefit for the settlor, was to give effect to this principle not only in cases where the income is enjoyed by the settlor or his wife in the year of assessment but also in those cases in which the settlement provides a postponed enjoyment of the income either by the settlor or by his wife in his lifetime. The same considerations apply mutatis mutandis to the provisions of section 18. I do not agree that the 'wife of the settlor' in the year of assessment is treated as a persona designata, but even if it were so the question would still remain whether the interest of the persona designata, if it only takes effect after her marriage has been dissolved, is obnoxious to the provisions of these sections.'

19. Lord Morton of Henryton in his speech at page 109 pointed out that he did not agree with the observation of Clauson L. J. in Gaunt's case. He observed :

'I think that the treatment of husband and wife by the legislature for income-tax purposes rests on the view that any income enjoyed by one spouse is a benefit to the other spouse. It is not surprising, therefore, that in the sections now under consideration a benefit to the wife of the settlor is treated as being a benefit to the settlor, but it seems to me unlikely that this principle is being extended by these sections to the widow of the settlor.'

20. Therefore, the House of Lords declined to accept the interpretation placed by the Court of Appeal in Gaunt's case to the effect that the word 'wife' occurring in the relevant provisions of Finance Act included a widow as well.

21. Regarding both these decisions a note of warning was sounded by the Supreme Court in Philip John Plasket Thomas's case. At page 104, the two cases, the case of the House of Lords referred to above and Gaunt's case, were both referred to and, after referring to these two cases, S. K. Das J., delivering the judgment of the Supreme Court, observed :

'Now, it is quite clear to us that the treatment of husband and wife in the Indian Income-tax Act, 1922, does not rest on the view that any income enjoyed by one spouse is a benefit to the other spouse; for sub-section (3) of section 16 makes it quite clear that all income enjoyed by the wife is not to be included in the income of the husband and only such of the wife's income as comes within the sub-section is to be included in the income of the husband. We, therefore, think that the English decisions are not in point and there are no reasons why the word 'wife' or the word 'husband' should not be given its true natural meaning.'

22. In view of this decision of the Supreme Court it is clear that for the purposes of the Indian Income-tax Act, 1922, we have to proceed upon the footing that the word 'wife' or the word 'husband' or the word 'spouse' for the matter of that occurring in the relevant section has to be interpreted in its true natural meaning and not on the basis of any decision of the courts in England where the scheme of treating the wife's income and the husband's income is altogether different from the scheme of the Income-tax Acts in India.

23. To borrow an analogy from another branch of law, when an accident takes place resulting in the death of an individual, cannot be said that the cause of action in connection with the death accrued to that individual; it accrues to the estate because it is the death of the individual which gives rise to the cause of action to sue the person responsible for causing the death of the deceased. If any liability for the death can be fixed on another individual, the estate of the deceased will be entitled to sue the party responsible for causing the death of the deceased. Thus, when the cause giving rise to any accrual of the rights is the death of any particular individual, the accrual of the rights flowing from that death is not to that individual but to somebody else. In the same manner, when the partnership-firm is dissolved on the death of Ratilal Ranchhoddas, the deceased assessee before us, the right of Lilavati to receive the profits which accrued to her because of the death, cannot be said to accrue to her in her capacity as the wife of the deceased-assessee. The particular event which gave rise to the dissolution of the firms and hence to a right in Lilavati to receive her share of the profits as of July 1, 1963, also snapped the marital relationship and as a result she ceased to be the wife of the deceased-assessee. Under these circumstances, it must be held, to use the language of the Supreme Court in Philip John Plasket Thomas's case, that the marital relationship between Lilavati and her deceased husband no longer subsisted at the time when her right to receive the share of the profits accrued to her or arose to her. She ceased to be the wife of the deceased by the very event which gave rise to a right in her to receive her share of profits from the two partnership-firms. Following the interpretation placed by the Supreme Court in Philip John Plasket Thomas's case on section 16 (3) (a), equivalent to section 64(1)(i), it must be held in the instant case that, so far as the share of profits coming to Lilavati was concerned, that amount was not liable to be included in the total income of the deceased-assessee at least so far as the share of profits up to July 1, 1963, was concerned.

24. As regards the shares of the profits coming to the minors under section 64(1)(ii) of the Act of 1961, such income arises to a minor child of the assessee from the admission of the minor to the benefits of the partnership in the two firms and is liable to be included in the benefits. The fact that the deceased died did not mean that the minor ceased to be the child of Ratilal Ranchhoddas. The relationship which subsisted up to July 1, 1963, until the moment of the death of the deceased, was not snapped nor did the right of the minor child arise or accrue to him by an event which rendered him a non-child of the deceased. The two minor sons of the deceased did not cease to be his sons because of the death of the deceased and the relationship cannot be said to have come to an end by reason of the death of the deceased. Under these circumstances at least as regards the shares of the profits coming to the shares of the minor sons for the period ending on July 1, 1963, their share of the profits was liable to be included in the total income of the deceased-assessee.

25. We, therefore, answer the question referred to us as follows. Out of the amount of Rs. 13,600 the share of the profits coming to the widow, Lilavati, and allocated to her up to July 1, 1963, was not liable to be included in the total income of the assessee for Samvat Year 2019. However, out of the said sum Rs. 13,600 the shares of profits allocated to the two minor sons, Kirankumar and Sanjaykumar, for the period up to July 1, 1963, were liable to be included in the assessee's total income for Samvat Year 2019 and liable to be assessed in the hands of the assessee for the assessment year 1964-65. In view of the peculiar facts of this case, there will be no order as to costs.


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