Income Tax Appellate Tribunal - Chennai
M.Pranuthi , Salem vs Department Of Income Tax on 26 April, 1995
IN THE INCOME TAX APPELLATE TRIBUNAL
CHENNAI BENCH 'A' : CHENNAI
[BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER
AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER]
I.T.A.Nos.1120 to 1125/Mds/2010
Assessment yeas : 2003-04 to 2008-09
The ACIT vs M. Pranuthi
Circle I C/o R.P.Sarathy
Salem 21, Gandhi Road
Salem 636 007
[PAN - AGMPP9169P]
(Appellant) (Respondent)
Appellant by : Shri Shaji P. Jacob
Respondent by : Shri S.Sridhar
ORDER
PER BENCH:
This is a bunch of six appeals filed by the Revenue pertaining to assessment years 2003-04 to 2008-09, involving identical issue regarding assessment of minor's income in the hands of a grandfather in the capacity of 'representative assessee' u/s 160(1)(ii) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act' for short) or under any provision of the Act for that purpose. For better appreciation of facts and to be brief at the same time, we proceed to decide them by a common order.:- 2 -: ITA 1120 to 1125/10
2. The undisputed facts in relation to all these appeals are that M.Pranuthi, who was admittedly, a minor during the relevant years, was born on 14.12.1990. On 28.6.1993, she was traveling in a car alongwith her parents and paternal grandmother. The car met an accident in which she only survived. She was separately assessed to income-tax for the assessment year 1992-93. After insertion of section 64(IA) with effect from the assessment year 1993-94, her income from rent and interest relating to the period from 1.4.1990 to 5.7.1993 was clubbed with her father's income till his death on 5.7.1993. It may be mentioned that as a result of injuries sustained by her father on 28.6.1993, he died on 5.7.1993 but others had died on the spot. After the death of her father, her paternal grandfather, Shri R.P.Sarathy, who is admittedly her next friend, filed return of her income voluntarily year after year. These returns were, however, filed with a rider that although she had taxable income, but she being a minor, was not taxable at all, in the given facts and circumstances of the case and since her parents had already died and u/s 64(IA) her income can only be clubbed in the hands of either of her parents. Nevertheless, entire tax levied were paid but simultaneously refund of entire tax paid was claimed. Thus, in a way, returns filed admitted 'NIL' income. It is also a fact that she did not earned income by any manual work done :- 3 -: ITA 1120 to 1125/10 by her or activity involving application of her skill, talent, specialized knowledge and experience as has been envisaged in proviso to section 64(IA). For the period from 5.7.2003 to 31.3.2004 she has declared 'NIL' income, but the income disclosed in the enclosed statement was added by the Assessing Officer as a prima-facie addition u/s 143(1) for the assessment year 1994-95 through an Intimation dated 26.4.1995. As per this Intimation, the assessee was conveyed that it was being issued u/s 143(1) r.w.s 160(1)(ii) as per the provisions relating to 'representative assessee'. But this action was not upheld and rather set aside/cancelled by the ITAT, Chennai Benches, being a debatable matter outside the purview of section 143(1). Thereafter, no assessment u/s 143(3) was made at all for assessment year 1994-95. The Tribunal in its order dated 2.9.2005, passed for assessment years 1995-96 to 1999-2000 reported in (2005) 97 TTJ (Chennai) 801, in the case of R.P.Sarathy for Minor M.Pranuthi vs JCIT, after considering the CBDT Circular No.754 dated 10.6.1997, 226 ITR (Statute) 9, issued in connection with VDIS, 1997, has categorically held that there is no provision in the Act to assess the income of the minor in the hands of either minor or in the hands of her grandparents or any of their relative, but can be assessed in the hands of either of her parents. Such an income cannot be assessed at all in the hands of any one who :- 4 -: ITA 1120 to 1125/10 maintains the minor. In the given case, the parents of the minor have already died hence, the Tribunal has held that the income of the minor cannot be clubbed in the hands of her grandfather. Subsequently, for assessment years 2000-01 to 2002-03 the Tribunal has been taken same view although the Revenue has taken a ground u/s.160(1)(ii) of the Act. In the order dated 5.10.2007 and it has incorporated the entire grounds raised by the Revenue including the application of the provisions of section 160(1)(ii) of the Act. It was held that if both parents of a minor are not alive, minor's income cannot be assessed in the hands of her grandparent or any other relative(s) who maintains the child. The only way of assessment of minor's income is by way of clubbing the income with the income of either of the parents subject to the exception contained in section 64(IA). It has been categorically held by the Tribunal that there is no provision in the Act to assess minor's income independently, in the hands. In case both the parents are not alive, her income cannot be assessed in the hands of her grandparents or in the hands of her relatives. So it was found that the issue involved in these appeals is exactly identical in these years as well and hence stands covered by the Tribunal orders (supra) in assessee's own case. The ld. DR tried to differentiate the facts by submitting that in those Tribunal orders, the provisions of section :- 5 -: ITA 1120 to 1125/10 160(1)(ii) have not been considered on their merits although admittedly in the order dated 5.10.2007 passed for assessment years 2000-01 to 2002-03 in I.T.A. Nos. 2844, 2777 & 2778/Mds/2005, in assessee's own case, the question of 'representative assessee' u/s 160(1)(ii) was raised vide Ground No.4 which has been incorporated at page 2 of the Tribunal order but the Tribunal has followed its own order in assessee's own case dated 2.9.2005 rendered in I.T.A.No. 833 to 839/Mds/2001 in which this section i.e 160(1)(ii) was not at all considered. The ld.DR, further argued the matter with reference to sections 4, 2(3), 2(7) and section 161(2)(iii) of the Act. He has also contended that in earlier years, the question was entirely different because minor's income was clubbed in the hands of the grandfather. It was argued that in the given cases instead of clubbing the minor's income in the hands of her grandfather, her grandfather has been made a 'representative assessee' u/s 160(1)(ii) of the Act, therefore, the earlier Tribunal orders will not apply to the assessment years under consideration.
3. We have gone through all the provisions including the precedents relied upon by both the parties. The Scheme of the Act is that after assessment year 1992-93, a newly inserted provision 64(IA) was made operative which came into effect only after assessment year :- 6 -: ITA 1120 to 1125/10 1992-93. Upto assessment year 1992-93, minor was assessable to tax in his own hands but after section 64(1A) was brought on statute, minor is no longer assessable to tax in her individual capacity. There is no other charging provision in the Act in this regard. It is true that in earlier years, when Tribunal order was rendered, the income of the minor was clubbed with the income of grandfather. The grandfather is not included in the definition of 'parent' in so far as Income-tax Act, 1961 is concerned. In this way, it was argued that when the Tribunal has not really considered the provisions of section 160(1)(ii) while rendering the above mentioned decisions, it would not be treated as a decision on this subject to be a precedent of the Co-ordinate Bench on the issue, on the basis of the Hon'ble Madras High Court's decision rendered in the case of CIT vs Hi Tech Arai Ltd, 321 ITR 477. We are in agreement with the ld.DR to that extent. The only grudge of the Department is that according to it, the provisions of section 160(1)(ii) were not considered in its correct perspective and these are relevant in the years under consideration. The provisions of section 160(1)of the Act are being extracted herein below for ready reference:
Representative assessee.28
160. (1) For the purposes of this Act, "representative assessee" means--
(i) in respect of the income of a non-resident specified in 29[***] sub-section (1) of section 9, the agent of the non-resident, :- 7 -: ITA 1120 to 1125/10 including a person who is treated as an agent under section 163;
(ii) in respect of the income of a minor, lunatic or idiot, the guardian or manager who is entitled to receive or is in receipt of such income on behalf of such minor, lunatic or idiot;
(iii) in respect of income which the Court of Wards, the Administrator- General, the Official Trustee or any receiver or manager (including any person, whatever his designation, who in fact manages property on behalf of another) appointed by or under any order of a court, receives or is entitled to receive, on behalf or for the benefit of any person, such Court of Wards, Administrator-General, Official Trustee, receiver or manager;
(iv) in respect of income which a trustee30 appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise [including any wakf30 deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913),] receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees;31
[(v) in respect of income which a trustee appointed under an oral trust receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees.
4. A plain reading of the above provision, clearly evinces that they relate to 'representative assessee'. Section 160 defines as to who is a 'representative assessee'. As per ld.DR this case may fall under section.160(1)(ii) whereunder a 'representative assessee' in respect of the income of a minor and other, the 'guardians' or 'manager', who is entitled to receive or is in receipt of such income on behalf of such minor etc. The other inclusive definition of 'representative assessee' has been given in sub clause(iii) of sub-section (1) of section 160 in respect of income which the Court of Wards, the Administrator General, the Official Trustee are any receiver or manager including any person, whatever his designation, who in fact manages property on :- 8 -: ITA 1120 to 1125/10 behalf of another appointed by or under any order of a court, receives or is entitled to receive, on behalf or for the benefit of any person, such Court of Wards, Administrator General, Official Trustee, receiver or manager, is a 'representative assessee'. Per contra, the ld. AR has vehemently refuted the above contentions of ld. DR. He has stated that neither sub-clause (ii) nor (iii) of sec.160(1) would apply because the 'grandfather' of the minor does not fit in the definition of representative-assessee given therein. We have given our anxious and thoughtful consideration to the entire gamut of facts in the light of the relevant provisions and the precedents. We have also treaded through the allied enactments like the General Clauses Act, the Indian Contract Act and the Guardianship and Wards act. But we are unable to accept the contention of the ld. DR. The reasons for our above epilogue is that no Court Guardian, Administrator General or Official Trustee or any Receiver or Manager has been appointed by or under any order of a Court to receive income or is entitled to receive income on behalf, or for the benefit of the minor in question. A copy of 'Succession Certificate' issued by a Civil Court has been filed in support of his contention by ld. DR. But we are afraid that this document would fructify in support rather it would go against the line taken by the Revenue. In the petition filed by the minor to get a 'Succession :- 9 -: ITA 1120 to 1125/10 Certificate' her grandfather has been made only 'a next friend' to file the petition. In fact, after the death of her parents and grandmother, it became imperative to decide as to who would succeed the estate of the deceased persons who had died intestate. Under Civil Law a minor is prohibited from filing a suit directly but he can do so through his/her 'natural guardian' or 'next friend'. Since grandfather was not considered as natural guardian, he has pursued the suit as minor's representative being her next friend. As per the copie(s) of 'Succession Certificate' produced before us, Shri R.P.Sarathy has neither received nor is entitled to receive any property/income on behalf of the minor M.Pranuthi alias M.Mahalakshmi and whatever has been received by the minor in her own capacity and whatever has been received in succession from the estate of the deceased has been received by the minor in her own capacity. Thus, it cannot be said that Shri R.P.Sarathy is either the guardian as has been stipulated in the provisions stated above nor he is manager or Administrative General as the case may be and hence the provisions of section 160(1)(ii) or (iii) will not at all apply. We can understand the concern of the ld.DR that it sounds strange when any income goes untaxed. We also share the concern of ld. D.R. But we are bound by the explicit provisions of the Fiscal Law wherein we cannot supply implicit :- 10 -: ITA 1120 to 1125/10 meanings to an express provision. We cannot add to or subtract from any provision in the Act and the Statute has to be considered in its plain and ordinary meaning. As far as the decisions of the Hon'ble Madras High Court in the cases of G.K.Ravi vs CIT, 235 ITR 208 and CIT vs Hi Tech Arai Ltd, 325 ITR 477, on which the ld.DR has relied are concerned, they were rendered prior to amendment and relate to provisions when minor was assessable in her individual capacity i.e prior to insertion of section 160(1)(ii) of the Act on the Statute book. We cannot agree with the ld.DR that these decisions laid down any general principle and would also apply to amended provisions. The simple reason for that being that when no longer there is any provision to assess a minor in his individual capacity, the entire heart and soul of the provision has changed and the principle, if any, laid down by the Hon'ble Court in relation to repealed sections therein would not be relevant for the present scenario. Hence, we hold that the income of this minor cannot be assessed in the hands of alleged representative- assessee, at all, under the existing law, as conditions laid in section 160(1)(ii) & (iii) are not satisfied. Accordingly, respectfully following the Tribunal orders in question as well as in view of our foregoing observation on the provisions of section 160(1)(ii)/(iii) of the Act, we :- 11 -: ITA 1120 to 1125/10 cannot allow these appeals of the Revenue. Accordingly, all the appeals of the Revenue stand dismissed.
5. In the result, all the appeals of the Revenue stand dismissed.
The order pronounced in the open court on 25.3.2011 Sd/- Sd/-
(ABRAHAM P GEORGE) ( HARI OM MARATHA )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 25th March, 2011
RD
Copy to: Appellant /Respondent/CIT(A)/CIT/DR