The court established that the income arising to the minor sons from their admission to a partnership firm can be included in the total income of the assessee under section 64(1)(iii) of the Income-tax Act, 1961, even if the assessee has no income of his own.

K. A. THANIKKACHALAM, J.

At the instance of the Department, the Tribunal referred the following two common questions for the assessment years 1974-75, 1975-76 and 1977-78, for the opinion of this court, under section 256(1) of the Income-tax Act, 1961.

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the share income arising to the minor sons by virtue of their admission to the partnership firm cannot be included in the individual assessment of the assessee under section 64(1)(iii) of the Income-tax Act, 1961, for the assessment years 1974-75, 1975-76 and 1977-78 ?

2. Whether the Appellate Tribunal's further finding that the provisions of section 64(1) cannot be invoked to include the minors' income, if the parent has no income of his own as ' individual ' is sustainable in law and is based on a proper appreciation of the provisions of section 64 as amended by the Taxation Laws (Amendment) Act with effect from April 1, 1976 ?"

So far as the first question is concerned, the point for consideration is, whether the share income arising to the minor sons by virtue of their admission to the benefits of the partnership-firm can be included in the individual assessment of the assessee under section 64(1)(iii) of the Income-tax Act, 1961, for the assessment years 1974-75, 1975-76 and 1977-78. In so far as the first question relating to the assessment years 1974-75 and 1975-76 is concerned, the point arises before the amendment to section 64 by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. In CIT v. Shri Om Prakash 1996 AIR(SC) 593, 1996 (1) AD(SC) 205, 1996 (217) ITR 785, 1995 (8) JT 245, 1995 (6) Scale 487, 1995 (S4) SCC 737, 1996 (130) CTR 82, 1996 (84) TAXMAN 156, 1996 (2) TLR 171, 1996 (130) CTR(SC) 82 the Supreme Court held that income accruing to the wife and minor sons cannot be included in the individual assessment of husband or of the Hindu undivided family, under section 64(1)(ii) of the Income-tax Act, 1961, prior to the 1976 amendmentAfter the assessment year 1976-77, i.e., for the assessment year 197778, in the present case, the position is that the income arising to the minor sons of the assessee as a result of their admission to the benefits of a partnership is liable to be included in the total income of the assessee under section 64(1)(iii) of the Act, notwithstanding that the assessee has no income of his own from any source whatsoever. Therefore, in so far as the first question is concerned relating to the assessment years 1974-75 and 1975-76, it is answered in the affirmative and against the Department.

In so far as the assessment year 1977-78 is concerned, the question referred to us is answered in the negative and in favour of the Department.

In so far as question No. 2 is concerned, it relates to the application of the provisions of section 64(1) of the Income-tax Act, 1961. The Tribunal's finding that the provisions of section 64(1) cannot be invoked to include the minors' income, if the parent has no income of his own as individual, is not sustainable in law in view of the amendment brought about to section 64 of the Act by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976, and in view of the decision of this court in CIT v. P. Alwarsamy 1995 (211) ITR 353 wherein it was held that the income arising to the minor sons of the assessee as a result of their admission to the benefits of partnership was liable to be included in his total income under section 64(1)(iii) of the Income-tax Act, 1961, notwithstanding that the assessee had no income of his own from any source whatsoever. Accordingly, we answer this second question referred to us in the negative and in favour of the Department. No costs.