INCOME TAX ACT, 1961

Section 64(1)(iii)

Clubbing of income - Scope and applicability of section 64(1)(iii) w.e.f. 1-4-1976 - Share income of minor sons of assessee -

Issue arose under consideration as to whether Tribunal was correct in holding that the share income of minor sons of assessee's, including share in interest on capital credited to the minor sons out of the partnership firm was to be computed in the hands of their father under section 64(1)(iii). The said provision was introduced in the Income Tax Act by the Taxation Laws (Amendment) Act, 1975 with effect from 1-4-1976, whereas the accounting year of assessee's cases came to an end on 10-8-1975 and on 31-12-1975 in Taxation Case No. 126 of 1983 and Taxation Case No. 28 of 1986 respectively. Held: Under the new provision, i.e., section 64(1)(iii) a new liability has been prescribed and not the rate for ascertaining the liability. Such new liability under the Act could not be given a retrospective effect. Such liability can only be fastened on an individual if the same existed at the time of accrual and not at the time of assessment. Amending Act introduced a new section 64(1)(iii) with effect from 1-4-1976 and a new tax liability which came into force with effect from 1-4-1976 could not be given a retrospectivity and be made applicable to the previous accounting year, i.e., 1975-76 corresponding to the assessment year, i.e., 1976-77. Therefore matter was remanded back to Tribunal for disposing of the matter in terms of the law

REFERRED : Karimtharuvi Tea Estates Ltd. v. State of Kerala AIR 1966 SC 1385 : (1966) 60 ITR 262 (SC) : 1966 TaxPub(DT) 0296 (SC) Kesoram Industries & Cotton Mills Ltd. v. CWT AIR 1966 SC 1370 : 1966 TaxPub(DT) 0256 (SC) Badri Prasad & Ors. v. CIT (1990) 185 ITR 307 (Pat) : 1990 TaxPub(DT) 0926 (Pat-HC) Maneklal Vallabhdas Parikh & Sons v. CIT (1969) 72 ITR 637 (Guj)) : 1969 TaxPub(DT) 0015 (Guj-HC)

FAVOUR : In assessee's favour by way of remand

A.Y. :

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