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Commissioner of Income-tax Vs. B.K. Birla - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 200 of 1976
Judge
Reported in[1986]157ITR348(Cal)
ActsIncome Tax Act, 1961 - Sections 147, 256(1) and 256(2)
AppellantCommissioner of Income-tax
RespondentB.K. Birla
Appellant AdvocateH.M. Dhar, Adv.
Respondent AdvocateR.K. Bajoria, Adv.
Excerpt:
- .....the assessment year 1966-67. she had a bank account in her name. the assessee as guardian of his minor daughter transacted speculation business in shares through the brokers, m/s. kothari trading co. ltd. and m/s. jhawar & co. the income-tax officer examined the two brokers to enquire at whose instructions those transactions were entered into. they replied that the contracts were made on the instructions of the assessee. the assessee's contention against the inclusion of the speculation income in the name of kumari manjusri birla was that the income had been deposited in the bank account of the minor and that she was the real beneficiary and that the income did not belong to him. the income-tax officer, however, was of the opinion that it was the assessee who had applied his own skill.....
Judgment:

Ajit K. Sengupta, J.

1. This is a reference under Section 256(1) of the Income-tax Act, 1961. The assessment for the assessment year 1966-67 was reopened under Section 147 of the Income-tax Act, 1961, on the ground that income had escaped assessment as the speculation income earned in the name of Kumari Manjusri Birla, the daughter of the assessee, really belonged to the assessee. Kumari Manjusri Birla, the daughter of the assessee, was a minor during the assessment year 1966-67. She had a bank account in her name. The assessee as guardian of his minor daughter transacted speculation business In shares through the brokers, M/s. Kothari Trading Co. Ltd. and M/s. Jhawar & Co. The Income-tax Officer examined the two brokers to enquire at whose instructions those transactions were entered into. They replied that the contracts were made on the instructions of the assessee. The assessee's contention against the inclusion of the speculation income in the name of Kumari Manjusri Birla was that the income had been deposited in the bank account of the minor and that she was the real beneficiary and that the income did not belong to him. The Income-tax Officer, however, was of the opinion that it was the assessee who had applied his own skill in doing the speculation business. The income really belonged to him. According to him, the minor could not do that business. The Income-tax Officer, therefore, included the speculation income of Rs. 9,020 earned in the name of Kumari Manjusri Birla in the assessment of the assessee. When the matter came up in the appeal before the Appellate Assistant Commissioner, it was urged that the assessee had done the speculation business of the minor as guardian of his minor daughter and that she was the real beneficiary. It was urged that even if the business was illegal, the income was assessable in the hands of the minor daughter. This contention found favour with the Appellate Assis. tant Commissioner and he deleted the addition of Rs. 9,020 from the income of the assessee.

2. Aggrieved by the order of the Appellate Assistant Commissioner, the Department came up in appeal before the Appellate Tribunal. The Tribunal after considering the rival submissions observed that there was a bank account in the name of Kumari Manjusri Birla which showed that the minor had her own capital. The business was done by the assessee as guardian of his minor daughter. It observed that the Income-tax Officer made enquiry from the brokers who supported the assessee's contention on this point. According to the Tribunal, the guardian of the minor had the authority to do the business on behalf of the minor, though he could not embark upon a new hazardous business so as to burden the estate with the risk of that business. The Tribunal then observed that speculation business in shares was not by itself illegal but even if in doing that business for the minor daughter, the assessee could not legally bind the estate of the minor, the illegality of that business did not affect the liability. The Tribunal observed that the guardian who carried on the business of the minor no doubt applied his mind but did business on behalf of the minor and not his own business and he could only be assessed in respect of the income of the minor from that business in a representative capacity and no personal assessment could be made on the guardian in respect of such income. The Tribunal held that in the present case, there was no material to show that the business really belonged to the assessee and not to the minor daughter as the brokers supported the assessee's contention that the business belonged to the minor daughter, though the transactions were done by the assessee. The Tribunal held that the income earned by the guardian from the speculative business carried on by him in the name of the minor belonged to the minor. The Tribunal did not find any reason to interfere with the order of the Appellate Assistant Commissioner.

3. On the aforesaid facts, the following question of law has been referred to this court :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in excluding the income from speculation business in the name of Kumari Manjusri Birla, minor daughter of the assessee, from the total income of the assessee ?'

4. It has been contended on behalf of the Revenue that the Tribunal accepted the statement of the assessee without enquiring into the source of the investment or capital alleged to have been made by the minor in the business. It has further been contended that the minor could not herself carry on the business and, as a matter of fact, it was the father of the minor who carried on the business and the income therefrom was rightly assessed in the hands of the father.

5. On the other hand, it is submitted on behalf of the assessee that the principles laid down in CIT v. K. K. Birla : [1982]137ITR126(Cal) , would govern this case.

6. For more than one reason, we are unable to accept, the contention of Mr. H. M. Dhar, learned advocate for the Revenue. The Tribunal held that in the present case, there was no material to show that the business really belonged to the assessee and not to the minor daughter, though the transaction was done by the assessee. This finding was challenged by a specific question but the Tribunal did not allow that said question. Secondly, the finding of the Tribunal that the minor had her capital and the business was done by the assessee as guardian was also challenged by a specific question as being perverse. That question was also refused by the Tribunal. The Revenue thereafter did not move this court under Section 256(2) of the Income-tax Act, 1961. Thus, the question has to be answered on the facts found by the Tribunal.

7. In the case of CIT v. K. K. Birla : [1982]137ITR126(Cal) relied on by Mr. Bajoria, learned advocate for the assessee, the Income-tax Officer included the income from speculation business and the income from dividend and interest arising out of the investment made from such speculation income earned in the name of the assessee's minor daughter in the asses-see's total income for the assessment years 1967-68, 1968-69 and 1969-70, on the ground that the speculative transactions had been entered into by him as guardian of the minor and the income had been earned by the utilisation of his skill. The facts showed that the legal ownership of the profits from the speculation business belonged to the minor, the cheques were given in her name and credited in her account and the benefit of that income accrued to the minor and was not enjoyed by the assessee. The Tribunal found that the speculation business was not carried on benami and held that the income was not includible in the assessee's total income. This court held that the minor was carrying on business through the guardian, her father. The assessee was not acting for himself but as the guardian, for and on behalf of the minor. There was no law debarring a minor from entering into a contract through her guardian. The Tribunal was right and the income of the minor from the speculation business and the interest arising out of the investment made from such speculation income were not assessable as the income of the assessee.

8. As indicated earlier, the Tribunal in this case has found that there was a bank account in the name of the assessee's daughter. She had her own capital. The business was done by the assessee as guardian of his minor daughter and the brokers also supported the assessee's contention that the business was carried on by the minor daughter, though the transaction was done by the assessee. Where the minor carried on the business through guardian father and the father was acting not for himself but as the guardian, for and on behalf of the minor, the income earned by such business carried on by the minor cannot be included in the hands of the guardian father. We are, therefore, of the view that, on the facts of this case, the Tribunal arrived at the correct conclusion. We, therefore, answer the question in the affirmative and in favour of the assessee.

9. There will be no order as to costs.

Dipak Kumar Sen, J.

10. I agree.


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