High Court Of Madras
CIT vs. K.J. Ramaswamy
Sections 64(1)(iii), Expln. 2A
Asst. Years 1981-82, 1982-83
R. Jayasimha Babu & Mrs. A. Subbulakshmy, JJ.
Tax Case Nos. 731 & 732 of 1990
5th September, 2001
Counsel Appeared
Mrs. Chitra Venkataraman, for the Revenue : None, for the Assessee
JUDGMENT
R. JAYASIMHA BABU, J. :
The assessment years are 1981-82 and 1982-83.
2. This Court in the case of CIT vs. Sitalakshmi (Minor) (1996) 217 ITR 595 (Mad) : TC S42.3664, in circumstances were similar to those in this case, held in favour of the assessee and against the Revenue. That decision however would not apply to the facts of the case before us, as Expln. 2A to s. 64 was incorporated in the statute w.e.f. 1st April, 1980, and remained a part of the statute till it’s repeal w.e.f. 1st April, 1993. The assessment years with which we are concerned are 1981-82 and 1982-83. The decision relied upon by learned counsel is one which was rendered in relation to an assessment year prior to 1980.
3. Explanation 2A to s. 64 of the IT Act reads as under : “for the purposes of cl. (iii), where the minor child of an individual is a beneficiary under a trust, the income arising to the trustee from the membership of the trustee in a firm shall, to the extent such income is for the benefit of the minor child, be deemed to be income arisingindirectly to the minor child from the admission of the minor to the benefit of partnership in a firm.” That Explanation makes it clear that income is deemed to arise indirectly to the minor from the admission of the trustee to the benefits of the partnership. The mere fact that the minor’s right to receive the income is postponed till he attains the age of majority does not defeat this Explanation. The law deems the income to have arisen indirectly to the minor by virtue of the trustee having been admitted to the benefits of the partnership and the time at which it is to be distributed is of no relevance in this context.
4. The Tribunal has held that the income credited to the minor’s account the trustee having been admitted to the benefit of a partnership firm, that amount was not taxable in the hands of the father solely by reason of the trust deed providing for the accumulation of the income till the minor attains majority. The Tribunal has failed to take note of the effect of the Expln. 2A to s. 64. The question referred to us, namely, Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the share income of the minors who were beneficiaries of a trust which was a partner in a registered firm cannot be clubbed in the hands of the assessee under s. 64(iii) of the IT Act, 1961 ?” is, therefore, answered in favour of the Revenue and against the assessee.
[Citation : 256 ITR 191]
