Andhra Pradesh H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the order of the AAC cancelling the assessments made on the assessee for each of the assessment years under reference ?

High Court Of Andhra Pradesh

CIT vs. M. Vyk Unta Rao

Section 64(1)(iii)

Asst. Year 1972-73, 1976-77, 1977-78

A. Raghuvir & Y.V. Anjaneyulu, JJ.

Referred Case No. 15 of 1983

26th November, 1987

Counsel Appeared

M.S.N. Murthy, for the Revenue

Y.V. ANJANEYULU, J.:

The Tribunal made this reference at the instance of the Revenue under s. 256(1) of the IT Act, 1961. The reference relates to the asst. yrs. 1972-73, 1976-77 and 1977-78. The question referred for consideration is : ” Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the order of the AAC cancelling the assessments made on the assessee for each of the assessment years under reference ? “

The assessee was a partner in a partnership firm in his capacity as Karta of a joint family. His minor sons were admitted to the benefits of the partnership. The ITO held the view that the share income of the minor sons was includible in the hands of the assessee as an individual under s. 64 (1)(iii) of the IT Act for the asst. yr. 1972-73.

For the asst. yrs. 1976-77 and 1977-78, the assessee seceded from the partnership firm leaving only his minor children as partners. For these two assessment years, the income arising to the minors from the partnership was taxed in the hands of the assessee as an individual.

The assessee contended that so far as the asst. yr. 1972-73 is concerned, the decision of this Court in CIT vs. Sanka Sankaraiah 1978 CTR (AP) 24 : (1978) 113 ITR 313 applies and the income of the minor sons is not liable to be included in his total income. The appellate authorities, including the Tribunal, accepted this contention. The Revenue is in appeal on this point. In view of the decision of this Court in Sanka Sankaraiah’s case (supra), the appellate authorities were justified in coming to the conclusion that the share income of the minor sons was not liable to be included in the assessee’s total income as an individual for the asst. yr. 1972-73.

The position is different for the asst. yrs. 1976-77 and 1977-78. For these two years, the amended provisions contained in the Taxation Laws (Amendment) Act, 1975, came into force on April 1, 1976. Therefore, from the asst. yr. 1976-77 onwards, the share income of the minor children is liable to be included in the total income of the assessee whether or not he is a partner in the same firm in which his minor children were admitted to the benefits of the partnership. The assessee’s contention, however, was that as an individual, he has no income at all and, consequently, the income of the minor children arising from the partnership cannot be included in his total income. It is contended that in order to justify the inclusion of the share income arising to the minors from the partnership firm in the bands of an individual, that individual himself must have income. If the individual concerned has no income whatsoever, then the question of inclusion does not arise.

The first appellate authority accepted the aforesaid. contention and this was later on affirmed by the Tribunal on appeal. The Revenue carried the matter in reference contending that for the asst. yrs. 1976-77 and 1977-78, the share income of the minors is liable to be included in the hands of the assessee as an individual.

This question arose before this Court for consideration in CIT vs. Gopal Rao (1985) 151 ITR 308. We accepted the contention of the Revenue that it is entirely immaterial that the individual in whose hands the income is liable to be included does not have income. It was pointed out that the amended provisions contained in s. 64(1)(iii) of the Act do not contain a condition precedent that the individual in whose hands the income should; be included must have income before the inclusion of the share income of the minor children. In view of the aforesaid decision of this Court, the assessment in the hands of an assessee as an individual for the asst. yrs. 1976-77 and 197778 is perfectly valid and the Tribunal was not justified in directing the exclusion of such income.

In the result, the reference is answered accordingly in favour of the Revenue so far as the asst. yrs. 1976-77 and 1977-78 are concerned and in favour of the assessee so far as the asst. yr. 1972-73 is concerned.

No costs.

[Citation : 173 ITR 364]

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