THE COMMISSIONER OF INCOME-TAX, MADRAS vs. S. A. S. MARIMUTHU NADAR
What did the Supreme Court hold?
The Supreme Court held that the assessee is entitled to earned income relief on the share income of the minor sons included in his total income. The Court interpreted Section 2(6AA) to mean that 'such income' refers to income earned by the assessee, or in the case of a firm, where the assessee is a partner actively engaged in the conduct of the business. The general intention of the section is to provide relief when the income of another person (minor or wife) is included in the assessee's total income, and the assessee has to pay tax on it. The Court reasoned that it is common for fathers to be actively engaged in business while their minor children are not, and the law should cater to such prevalent situations. The condition that the assessee must have worked actively as a partner is applicable even when considering the income of a minor or wife under the latter part of the definition. Therefore, the High Court's decision was upheld. The appeals were dismissed.
What were the facts?
The respondent, S.A.S. Marimuthu Nadar, formed a partnership with his two major sons. His two minor sons were admitted to the benefits of the partnership with specific shares. For assessment year 1949-50, the income of the two minor sons was added to the respondent's total income under Section 16(3)(a)(ii) of the Income-tax Act. The respondent was granted earned income relief only on his individual share of profits. For assessment year 1950-51, one minor son became a major, and only the remaining minor son's share was added to the respondent's income. Again, earned income relief was granted only on the respondent's share. The respondent's appeals to the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal were unsuccessful. The Tribunal referred a question of law to the Madras High Court, which answered it in favour of the assessee. The Commissioner of Income-tax appealed to the Supreme Court.
What were the issues?
1. Whether the assessee is entitled to earned income relief on the share income of his two minor sons for the assessment year 1949-50, and on the share income of one minor son for the assessment year 1950-51, which was included in his total income under Section 16(3)(a)(ii) of the Income-tax Act. Assessee's contentions: The respondent argued that earned income relief should be granted on the minors' share of profits included in his total income, as the profits were earned by him actively working as a partner in the business. He relied on the High Court's interpretation of Section 2(6AA). Revenue's contentions: The Department contended that earned income relief can only be granted to the father in respect of his own individual share of profits and not in respect of the share of the minor(s). They argued that for earned income relief to be admissible on income included under Section 16(3), the minor or wife must have been actively engaged in the conduct of the business, as per the definition of 'earned income' in Section 2(6AA).
Which sections of the Income-tax Act were involved?
Section 16(3)(a)(ii), Section 2(6AA), Section 66(a)(2)
AI-generated summary — verify with the full judgment below
Jgf] -'"9'1" 10, 102 SUPREME COURT REPORTS (1962) THE COMMISSIONER OF INCOME-TAX, MADRAS v. S. A. S. !IIARUIUTHU NADAR (P. B. GAJENDRAOADKAR, K.
SuBBA RAo and M. HIDAYATULLAII, J.J.)
Inwme Tax-Earned income relief-If r,an be granttd on minor son'• •hare of profits included in father's itWJme-Inrome· tax Act, 1922 (11of1922), SR. 2(6AA), 16(3) (a)(ii).
The respondent formed a partnership firm with his two major sons, and his two minor sons were admitted to the benefits of the partnership to the extent of their shares. In the relevant assessment years 1 he income of the minors was '( added to the Iota] income of the respondent under s. 16(3)(a) (ii) of the Inoome-tax Act and he was granted "earned income relief" only to the extent of his own individual share of the profits.
He claimed earned income 1elief under s. 2(6AA) of the Income-tax Act on the share of the profits of the minor sons which was included in his total income. llelrl, that the general in1ention of s. 2 (6AA) of the 1 ncomc-tax Act is to give relief in cases where the income of a minor is included in the to1al income of the father who has to \. pay income tax on the consolidated amount
The order continues below.
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