No Relaxation from Clubbing Provisions for Income Payable to a Minor Until She Attains Majority: HC

Case Details: SIBI JOY v. Income-tax Officer (TDS) - [2023] 150 taxmann.com 524 (Kerala)

Judiciary and Counsel Details

• • P. Gopinath, J.
  • D.S. Sreekumaran, T.S. Maya, Mahesh A. & Ramakrishnan P., Advs. for the Petitioner.
  • Christopher Abraham, SC for the Respondent.

Facts of the Case

Assessee, an individual, was entitled to 1/3rd share from the estate of his deceased husband. The remaining 2/3rd share was transferred in the name of the assessee’s minor daughter. The daughter’s share was deposited as a fixed deposit in the Bank, and the fixed deposit receipt was produced before the Court for safe custody until the daughter attained majority.

Assessee preferred an application under section 197(1) seeking a certificate for non-deduction of tax with respect to interest accruing annually on such fixed deposit. However, the Income-tax Officer rejected the application on the ground that the income of the minor had to be clubbed with the income of the assessee for the purpose of taxation under the Act.

Considering such tax deduction to be a huge financial burden, assessee filed a writ petition before Kerala High Court.

High Court Held

The Court held that section 64(1A) clearly states that income accruing or arising in the hands of a minor child will be added to the parent’s total income. Exceptions are provided only if income arises or accrues to the minor child on account of any manual work done by him or any activity involving the application of his skill, talent or specialized knowledge and experience.

The Act did not exempt the interest income accruing to the minor on an amount received as part of death benefits of her deceased father even if, by order of Court, that income can be utilized only after the minor attains majority.

Harshness in a statutory provision is no ground to hold that the income cannot be clubbed. Moreover, if this income were to be taxed only after the minor attains majority, the financial burden on the minor daughter when she attains the age of majority would be huge. Further, the tax deducted by the Bank as per section 194A will be available as credit (Rule 37BA of the Income-tax Rules, 1962). The benefit of threshold exemption is also available.

Therefore, the contention that the income could be taxed only after the minor attains majority cannot be accepted.

List of Cases Reviewed

• • Kapoor Chand v. Asstt. CIT [2015] 62 taxmann.com 211/234 Taxman 657/376 ITR 450 (SC) (para 5) distinguished.

List of Cases Referred to

• • CIT v. M.R. Doshi [1996] 85 Taxman 591/[1995] 211 ITR 1 (SC) (para 3)
  • Kapoor Chand v. Asstt. CIT [2015] 62 taxmann.com 211/234 Taxman 657/376 ITR 450 (SC) (para 3)
  • K.M. Vijayan v. Union of India [1996] 85 Taxman 75/[1995] 215 ITR 371 (Mad.) (para 6)
  • Shayara Bano v. Union of India [2017] 9 SCC 1 (para 6).