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Commissioner of Income-tax Vs. Saraswathi Viswanathan and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case Nos. 2, 4, 7, 8, 15, 64, 80, 91, 93 of 1971 and 369 of 1975 (Reference Nos. 2, 4, 7, 8, 14,
Judge
Reported in[1977]107ITR208(Mad)
ActsIncome Tax Act, 1961 - Sections 64; Income Tax Act, 1922 - Sections 16(3)
AppellantCommissioner of Income-tax
RespondentSaraswathi Viswanathan and ors.
Appellant AdvocateJ. Jayaraman and ;Nalini Chidambaram, Advs.
Respondent AdvocateS.V. Subramaniam, Adv. for ;C.V. Mahalingam, S. Mathrubutheswaran and K.J. Rebello
Cases ReferredSmt. Priti Lata Samanta v. Commissioner of Income
Excerpt:
.....act, 1961 and section 16 (3) of income tax act, 1922 - whether tribunal justified in holding that income of minor in partnership could be included in income of mother(assessee) under section 64 - assessee contended that section 64 not applicable to case where woman has lost her husband and has become widow - section 64 uses word 'individual' in neutral sense and does not refer to either wife or husband and even word 'spouse' used in neutral sense and not as husband and wife - nothing in section 64 to indicate that it would not apply to case where husband has become widower or women has become widow - answered against assessee. - - the assessing authorities as well as the tribunal held that under section 64 of the income-tax act, 1961, the income of those minors was includible in..........shall be included all such income as arises directly or indirectly-(a)so much of the income of a wife or minor child of such individual as arises directly or indirectly- (i)to the spouse of such individual from the membership of the spouse in a firm carrying on a business in which such individual is a partner;(i)to the spouse of such individual from the membership of the spouse in a firm carrying on a business in which such individual is a partner; (ii)from the admission of the minor to the benefits of the partnership in a firm of 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)from assets transferred directly or indirectly to the wife by the.....
Judgment:

Ismail, J.

1. The Income-tax Appellate Tribunal, Madras Bench, under Section 256(1) of the Income-tax Act, 1961, has referred the following question for the opinion of this court:

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the shares of income of the minor children admitted to the benefits of partnership in which the assessee, a widow, was a partner, are includible in her total income under the provisions of Section 64 ?'

2. One S. Viswanathan, who was carrying on business as proprietor of the Central Art Press, died on January 20, 1960. He was survived by his mother, his widow and a minor son, one major daughter and three unmarried minor daughters. These persons, under the Hindu Succession Act, 1956, were entitled to succeed to the estate of the deceased Viswanathan, each inheriting a one-seventh share. On February 23, 1960, a partnership came into existence between the widow of Viswanathan and his major daughter, Kamala, and the three minor daughters and the minor son were admitted to the benefits of that partnership. The mother of Viswanathan had relinquished her interest in favour of her grandson, i.e., the minor son of Viswanthan, and, therefore, his share became two-sevenths as against the one-seventh of the others. We are concerned in these cases with the correctness or otherwise of the inclusion of the shares of the three minor daughters and one minor son in the profits of the firm in the assessment of the widow of Viswanathan as the mother of the said four minors. The assessing authorities as well as the Tribunal held that under Section 64 of the Income-tax Act, 1961, the income of those minors was includible in the income of the mother, viz., the widow of Viswanathan, and had to be assessed in her hands as such. It is the correctness of this conclusion that is challenged in the form of the question referred to above in the present reference. T.C. No. 8 of 1971 and T.C. No. 369 of 1975 are at the instance of Mrs. Viswanathan, the former case (T.C. No. 8/1971) covering assessment years 1962-63 and 1963-64 and the latter case (T.C. No. 369/1975) covering the assessment year 1964-65. It may be pointed out that before the assessment year 1964-65, the son of Viswanathan had become a major and, therefore, for the assessment year 1964-65, the income of the three minor daughters alone has been included in the income of the mother. It is in these tax cases, the question referred to above arises. The other reference in T.Cs. Nos. 2, 4, 7, 15, 64, 80, 91 and 93 of 1971 have been made at the instance of the department. What happened in this case was that the officers of the department, while including the income of the minors in the income of the mother and assessing her in respect of the entire income, simultaneously by way of protective assessment, assessed the respective income of the minors in their hands. However, when the Income-tax Appellate Tribunal finally upheld the action of the authorities in including the income of the minors in the income of the mother under Section 64, it had to set aside the protective assessments made against the minors themselves in respect of their shares of income with reference to the three years in question and, therefore, the assessments were set aside. It is in respect of this part of the order of the Tribunal, the tax cases referred to above have come before this court at the instance of the department, the question raised there being :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in deleting the share income of the assessee from the firm of Messrs. Central Art Press for the assessment years 1962-63 and 1963-64?'

3. It is not necessary to refer to the question in each one of them because they are more or less similar except for the difference in the year of assessment and the name of the minor. It is the common case of both sides before us that if we decide Tax Cases Nos. 8 of 1971 and 369 of 1975 against the assessee, viz., Mrs. Viswanathan and in favour of the department, we must decide the other tax cases against the department.

4. Under these circumstances, the only question that arises for consideration is whether the Tribunal was right in holding that the income of the minors in the partnership could be included in the income of the mother, viz., Mrs. Viswanathan.

5. As we pointed out already, this was done under the provisions of Section 64 of the Income-tax Act, 1961. For the purpose of deciding this question with reference to the statutory provision referred to above, it is desirable to set out Section 64 of the Income-tax Act, 1961, along with Section 16(3) of the Indian Income-tax Act, 1922, to which Section 64 of the 1961 Act corresponded.

Sec, 16(3) of the Act of 1922Sec. 64(3) of the Act of 1961'In computing the total income of any individual for the purpose of assessment, there shall be included-

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

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

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

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

(ii)from the admission of the minor to the benefits of the partnership in a firm of 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)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; or

(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 by such individual otherwise than for adequate consideration or in connection with an agreement to live apart;

(iv)from assets transferred directly or indirectly to the minor child, not being a married daughter, by such individual otherwise than for adequate consideration; and

(iv)subject to the provisions of clause (i) of section 27, to a minor child, not being a married daughter of such individual, from assets transferred directly or indirectly to the minor child by such individual otherwise than for adequate consideration; and

(b)so much of the income of any person or association of persons as arises from assets transferred, otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife or a minor child or both.'

(v)to any person or association of persons from assets transferred otherwise than for adequate consideration to the person or association of persons by such individual, to the extent to which the income from such assets is for the immediate or deferred benefit of his or her spouse or minor child (not being a married daughter) or both.'

(Explanation omitted).

6. The question as to whether the word ' individual' occurring in Section 16(3) of the Indian Income-tax Act, 1922, connoted only the male of the species or it referred to both the male and the female came up for consideration before the Supreme Court in Commissioner of Income-tax v. Sodra Devi : [1957]32ITR615(SC) . In that case the Supreme Court held that the expression 'individual' occurring in Section 16(3) meant only the male in the species and did not refer to a female and, consequently, the income ofthe minor children in a firm could not be included in the income of the mother who is a partner in the firm. That decision was arrived at in view of the language and structure of Section 16(3) of the Indian Income-tax Act, 1922. From a perusal of Section 16(3) of the said Act, it is clear that Section 16(3)(a) opens by stating :

' 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 or indirectly--...'

7. Thus, it is clear that each of the Sub-clauses (i), (ii), (iii) and (iv) enumerated in Section 16(3)(a) has to be read only in conjunction with the opening portion of Section 16(3)(a), namely, 'so much of the income of a wife or minor child of such individual as arises directly or indirectly '. This portion of Section 16(3)(a) fixes up the sex of the ' individual ' as a male, because it refers to the wife of the individual. Consequently, once each one of the sub-clauses in Section 16(3)(a) has to be read with the opening portion of Section 16(3)(a), the expression 'individual' occurring in the four sub-clauses must certainly connote only a male and not a female. It is in view of this only it was held by the Supreme Court in the decision referred to above that the expression 'individual' in Section 16(3) meant only a male and not a female. However, both the structure and language of Section 64 of the Income-tax Act of 1961 are totally different. That section consists of five sub-clauses. The opening part of the section States :

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

8. Thus, the opening of Section 64 of the Income-tax Act, 1961, does not give any indication for the purpose of fixing the sex of the individual either as a male or as a female, and, therefore, the word 'individual' is capable of denoting a male as well as a female. Similarly, Sub-clause (i) of this section uses the neutral expression ' spouse' unlike Section 16(3) of the Indian Income-tax Act, 1922, which used the expressions, ' wife ' and ' husband ', Consequently, the structure and language of Section 64 of the 1961 Act clearly shows that the word ' individual' contemplated in the section can be a male as well as a female and is not confined only to a male.

9. Mr. Subrarnaniam, learned counsel for Mrs. Viswanathan, did not controvert this conclusion flowing from the language of Section 64. But his submission was a limited one. According to him, Sub-clause (i) of Section 64 refers to the spouse and the income of the spouse being included in the income of the individual. Therefore, the argument of the learned counsel for the assessee is that the section contemplates the existence of a subsisting marital relationship between the parties and, therefore, will have no application to a case where a woman has lost her husband and has become awidow, because, in that case, within the scope of Sub-clause (i) she will have no spouse whose income can be included in her income. If this argument is to be logically understood, the same reasoning will apply in the case of a widower also and, therefore, in the case of a widower, Sub-clause (i) will not apply as he has no wife living and, therefore, the expression 'individual' in the opening portion of Section 64 would only mean a male whose wife is alive or a female whose husband is alive and will not denote a widow or widower. We have no hesitation whatever in rejecting this argument of the learned counsel. In the first instance, there is absolutely nothing to indicate in Section 64 that each one of the sub-clauses is intended to apply only to a case where both the husband and wife are alive and it is not intended to apply to a case where a man has become a widower or a woman has become a widow. The structure of Section 64 is different from that of Section 16(3)(a) of the Indian Income-tax Act, 1922, because, as we pointed out already, the opening part that of Section 16(3)(a) does fix up the sex of the 'individual' by the use of the expression 'his wife' and each one of the sub-clauses of Section 16(3)(a) had to be understood with reference to its opening part and, consequently, the word ' individual ' in the sub-clauses of Section 16(3)(a) meant only a male. But that is not the position with regard to Section 64 of the Income-tax Act, 1961, where each one of the sub-clauses can be independently given effect to and worked out with reference to the opening portion of Section 64 itself, and, as we pointed out already, the opening portion of Section 64 uses the word 'individual' in a neutral sense and does not refer to either a wife or a husband and even in Sub-clause (i) the word used is, again, another neutral word, 'spouse' and not husband or wife. Therefore, we are clearly of the opinion that the argument that Section 64 is intended to apply only to a husband whose wife is alive or a wife whose husband is alive, has no substance.

10. We may also point out that, admittedly, on the language of Section 16(3)(a) of the Indian Income-tax Act, 1922, a widower would come within the scope of Section 16(3)(a). If the present argument of the learned counsel in respect of Section 64 is accepted, a widower will not come within the scope of Section 64. Certainly it could not have been the intention of the legislature, while enacting Section 64 replacing Section 16(3)(a) of the 1922 Act, to leave out of the scope of that section a person who was already within the net of that statutory provision, particularly when the legislature was trying to rectify a lacuna pointed out by the Supreme Court with reference to the language contained in Section 16(3) of the 1922 Act.

11. This interpretation of ours derives support from a judgment of the Allahabad High Court in Smt. Priti Lata Samanta v. Commissioner of Income-tax : [1971]79ITR18(All) . In that case also, an identical argument was advanced and that was rejected by the Allahabad High Court. Underthe above circumstances, we answer the questions'covered by T.Cs. Nos. 8 of 1971 and 369 of 1975 in the affirmative and against the assessee. In view of this answer to the questions covered by T.Cs. Nos. 8 of 1971 and 369 of 1975, we answer the questions covered by the other tax cases also in the affirmative and against the department. There will be no order as to costs in any of these references.


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