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1988 DIGILAW 330 (RAJ)

Commissioner of Income-tax Jaipur v. Abhay Kumar

1988-05-13

I.S.ISRANI, J.S.VERMA

body1988
J.S. VERMA, C.J.—This reference under Section 256 (1) of the Income-tax Act, 1961 at the instance of the revenue is to answer the following question of law, namely:- "Whether on the facts and in the circumstances of the case, the Tribunal is justified in upholding the order of the Appellate Assistant Commissioner of Income-tax that the clubbing of the share income of Shri Nitesh Kumar, minor, in the hands of the assessee HUF is not sustainable?" 2. The relevant assessment year is 1976-77. 3. The assessee is the Hindu Undivided Family represented by its Karta Abhay Kumar. Nitesh Kumar, minor son of the said Abhay Kumar was admitted to the benefits of partnership in a firm during the relevant period. The question was whether the share income of minor Nitesh Kumar could be clubbed with the income of the assessee HUF represented by Abhay Kumar as Karta for the purpose of computing the total income of the assessee HUF in accordance with Section 64(1) (iii) of the Act. It is not for the purpose of clubbing the share income of minor Nitesh Kumar with the income of his father Abhay Kumar as an individual that section 64(l)(iii) of the Act was relied on. The assessee contended that section 64 (1) (iii) was not attracted since assessee was the HUF represented by its karta Abhay Kumar and not Abhay Kumar as an individual. The Income-tax Officer rejected this contention. However, the AAC on appeal accepted the assessees contention and held that the share income earned by the minor could not be clubbed in the hands of the assessee HUF. The Tribunal has affirmed that view. Hence this reference at the instance of the revenue. 4. The relevant part of section 64 is as under: "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." The significant words in the above provision are the opening words in computing the total income of any individual in sub-section (1) and to a minor child of such individual in clause (iii) thereof. A plain construction of these words clearly indicates that the word individual have means a parent of the minor child and, therefore, this provision applies only where a parent of the minor child is the assessee in individual capacity. The definition of person in section 3(31) of the Act also indicates that an individual and a Hindu Undivided Family are distinct persons or distinct units for the purpose of assessment under the Act. Unless the context otherwise requires the meaning given in this definition is to be applied to the word individual used in Section 64. In our opinion, there is nothing in the context to require a departure from the ordinary meaning of the word individual and the words minor child of such individual o curring in clause (iii) reinforce the conclusion that the word individual used in sub-section (1) and clause (iii) thereof mean only a parent of the minor child whose income is to be clubbed. In our opinion the plain words of this provision do not admit of any ambiguity and it is clear that the provision can apply only when the assessee is a parent of the minor child; or in other words, the parent in individual capacity is the assessee and not in the representative capacity as karta of a HUF. This conclusion reached by us is also supported by the Explanations in sub-section (1) which are merely clarificatory and perform the normal role of an explanation to explain something which is already contained in the main enacting part. 5. In this view of the matter we are of the opinion that section 64(1)(iii) applies only in computing the total income of an individual for the purpose of clubbing the share income of a minor child of such individual or in other words where the assessee is in individual assessed in that status and not in the representative capacity of karta of a HUF. We shall now refer to the decisions cited at the Bar on this point. 6. We may first refer to the two decisions of Supreme Court which support the conclusion we have reached. The first decision is C. I. T. Vs. Sodra Devi (1), where the question was of the meaning to be given to the word individual in section 16(3) which is the corresponding provision in the Income-tax Act, 1922. 6. We may first refer to the two decisions of Supreme Court which support the conclusion we have reached. The first decision is C. I. T. Vs. Sodra Devi (1), where the question was of the meaning to be given to the word individual in section 16(3) which is the corresponding provision in the Income-tax Act, 1922. It was held that the word individual occurring in section 16(3) was restricted in its connotation and necessarily excluded from its purview a group of persons forming a unit of assessment. We are here not concerned with the change made in section 64(1) of the Income-tax Act, 1961 by substitution of the word spouse for the word wife occurring in section 16(3) of the Income-tax Act, 1922 which had given rise to the controversy in Sodra Devis case (supra) whether the word individual meant only the male and not also the female. However, substitution of the word spouse for the word wife has put the matter beyond controversy by indicating that the individual contemplated in section 64(1) of the 1961 Act can be either a male or a female. The other decision of the Supreme Court is in L. Hirday Narain V. Income-tax Officer A-Ward, Bareilly (2). It was held therein that section 16(3) (a) (ii) which is the corresponding provision in the 1922 Act did not apply for clubbing the income of the minor children of H with the income of H assessed as a HUF. in our opinion, both these decisions support the construction of section 64 (I) (iii) made by us. 7. We also find that the High Courts of Andhra Pradesh, Bombay, Delhi, Gujrat, Punjab & Haryana, and Karnataka have taken the same view and made a similar construction of section 64(1) (iii) of the Income-tax Act, 1961. These decisions are, C. I. T. V. Sanka Sankaraiah (3), Dinubhai Ishwarlal Patel V.K.D. Dixit 1 TO (4) C. I.T. Vs Anand Sarup (5), C. I. T. V. N.P. Khedkar (6), Prayag Dass lajgarhia v. C. I. T. Delhi (7) and C. Arunachalam Vs. C. I. T. (8). The decision of the Karnataka High Court is by a Full Bench and it is sufficient to refer to that alone since it considers this question at considerable length referring also to the change made in the 1961 Act as compared with the corresponding provision in the 1922 Act. C. I. T. (8). The decision of the Karnataka High Court is by a Full Bench and it is sufficient to refer to that alone since it considers this question at considerable length referring also to the change made in the 1961 Act as compared with the corresponding provision in the 1922 Act. Moreover, the Karnataka decision also considers the Full Bench decision of the Allahabad High Court in Sahu Govind Prasad V. C. I. T. (9) which was relied on to support the contrary view. "With respect, we find ourselves in agreement with the conclusion as well as the reasons on which that conclusion is based in the Karnataka decision. Accordingly, we do not find it necessary to reiterate the same here We may however add that the decision of the Full Bench of the Allahabad High Court in Sahu Govind Prasads case (supra) itself accepts dual capacity of the individual and it also indicates that it is in the Kartas assessment as an individual and not in his representative capacity on behalf of the HUF that the minors income is to be clubbed. With respect these observations in the Allahabad decision also support the construction we have made of section 64 (1) (iii) which is in accord with the view of the other High Courts as already indicated by us. 8. As a result of the above discussion, we are of the opinion that the karta of the HUF has a dual capacity i.e. as an individual and the representative capacity as karta of the HUF; and it is only in computing the total income as an individual and not in the other capacity as karta of HUF that the income of minor child of that individual can be clubbed in accordance with section 64 (1) (iii) of the Income-tax Act, 1961. In other words, where the minor childs parent is the assessee in representative capacity as karta of the HUF and not as an individual, section 64 (1) (iii) cannot be applied to club the income of the minor in computing the total income of the assessee HUF. Same being the view of the Tribunal it has to be upheld. 9. In other words, where the minor childs parent is the assessee in representative capacity as karta of the HUF and not as an individual, section 64 (1) (iii) cannot be applied to club the income of the minor in computing the total income of the assessee HUF. Same being the view of the Tribunal it has to be upheld. 9. Consequently, the reference is answered in the affirmative against the revenue and in favour of the assessee by holding that the Tribunal was justified in its view that clubbing of the share income of minor Nitesh Kumar in the hands of the assessee HUF is not sustainable. 10. No Costs.