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1962 Supreme(Ker) 331
High Court of Kerala
M.S. Menon, P Joseph, JJ.
Kumaraswamy Reddiar - Appellant
Versus
Commissioner Of Income Tax Kerala - Respondent
I.T.R. No. 1 of 1961
Decided On : 24-09-1962
S.16(3) of the Indian Income Tax Act, 1922, requires the inclusion of a wife's or minor child's income from a partnership in the total income of the individual for assessment purposes.
Headnote:
Income Tax - Assessment of Minor Daughters' Income - Interpretation of S.16(3) of the Indian Income Tax Act, 1922
Fact of the Case:
The assessee, a partner in a firm, contested the inclusion of his minor daughters' income from the firm in his total income for assessment purposes under S.16(3) of the Indian Income Tax Act, 1922.
Finding of the Court:
The court affirmed the Department's decision to include the minor daughters' income in the assessee's total income, as they were minors admitted to the benefits of partnership, not full partners.
Issues: The main issue was whether the assessment of the minor daughters' income in the hands of their father, the assessee, invoking the provisions of S.16(3)(a)(ii) of the Income Tax Act, was legal.
Ratio Decidendi: The court interpreted S.16(3) and the Indian Partnership Act, 1932, to conclude that the minor daughters' income should be included in the assessee's total income, as they were minors admitted to the benefits of partnership, not full partners.
Final Decision: The court answered the question in the affirmative and against the assessee, without any order as to costs.
M.S. Menon, C.J.
1. This is a reference by the Income Tax Appellate Tribunal, Madras Bench, under S.66(1) of the Indian Income Tax Act, 1922. The assessment year concerned is 1958-59 and the accounting period 1132 M. E.
2. The assessee was one of the partners of a firm consisting of himself, his two minor daughters, Rajeswari and Mayadevi, Balakrishna Reddiar, the husband of Rajeswari and Tiruvengada Reddiar, the husband of Mayadevi. The contention of the assessee which has been negatived by the Appellate Tribunal is that the Department was in error in including the income of Rajeswari and Mayadevi from the firm in computing his total income for the purpose of assessment, and that the said inclusion is not warranted by S.16(3) of the Indian Income Tax Act, 1922.
3. According to the assessee the income of Rajeswari from the firm should have been included in the total income of her husband, Balakrishna Reddiar and of Mayadevi in the total income of her husband, Tiruvengada Reddiar. S.16(3) of the Act reads as follows:
"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-
(i) from the membership of the wife in a firm of which her husband is a partner ;
(ii) from the admission of the minor to the benefits of partnership in a firm of 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
(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
(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."
It is evident from sub-clause (i) of clause (a) that the wife contemplated by that sub-clause is a wife capable of being a member of a partnership. Rajeswari and Mayadevi being minors cannot fall within that category. The Indian Partnership Act, 1932, makes it quite clear that in order to become a partner the person concerned must be a major according to the law to which the person is subject, and that a minor can only be admitted to the benefits of a partnership. Sub-s.(1) of S.30 of that Act says:
"A person who is a minor according to the law to which he is subject may not be a partner in a firm, but, with the consent of all the partners for the time being, he may be admitted to the benefits of partnership."
4. The Department has held that the provision applicable is sub-clause (ii) of clause (a), as Rajeswari and Mayadevi cannot be considered as members of the partnership but only as minors admitted to its benefits; and added their income from the firm not to the total income of their respective husbands but to the total income of their father. We are in agreement with what has been done by the Department and affirmed by the Appellate Tribunal.
5. The words "not being a married daughter" appear in sub-clause (iv) of clause (a) but not in sub-clause (ii) of clause (a), or clause (b), Sundaram says:
"The omissions do not seem to be intentional but the presence of the words in that part of the sub-section and their absence elsewhere cannot be ignored." (Law of Income Tax in India, 8th Edition, Page 679)"
6. According to S.2(6B) of the Indian Income Tax Act, 1922, the expressions "firm," "partner" and "partnership" when used in that Act will have unless there is anything repugnant in the subject or context - "the same meanings respectively as in the Indian Partnership Act, 1932 (IX of 1932): provided that the expression 'partner' includes any person who being a minor has been admitted to the benefits of partnership." It is significant that the ex
