Assessability of minor's income

Hi Piyush,

I understand your thinking. I know it sounds a bit fantastical toargue that since both the parents have passed, the income of theminor won't be taxable at all. It's true that the I T Act nowherestates that the minor's income would be exempt from tax.Actually, this seems to me to be a huge lacuna in the law. My pointis that the only way you can tax a minor in her own individual rightis in the event of her being an artist/child model or earning moneyfrom some manual skill she's developed or being physically/mentallychallenged. In the absence of such exceptions, the law does notrecognize a minor assessee at all. When I argued for not chargingorphan minor's income to tax, it wasn't on the ground that itwas "exempt" from tax. My thesis was based on the settled principleof law that in the absence of the machinery provisions, the chargingsection (Section 64 1A in this case) fails. It's been decided by theChennai Tribunal that parent means the biological parent only. Andwhen both the biological parents are no longer around, whose handswould you tax the minor's income in? If the law intended to tax theminors in their own right, why would they create Section 64(1A)? Whydidn't they provide for this eventuality of both the parents of thechild being no more, just as they've provided for the treatment ofthe minor's income in the case of the couple's divorce?If a childless couple dies and the insurance money is turned over totheir adult survivors say brother or sister, in that event theincome the survivors earn from the investment of those funds wouldbe taxable in their hands. But when the couple had nominated theirminor child as the nominee of their insurance claim, I am not sureif Section 160(1)(ii) can be invoked. Section 160 does not in anyway impinge upon the provisions of Section 64(1A). Since a minor isnot competent to contract, some representative assessee has to standin for him and sign the return, etc on his behalf. Seen in thislight, Section 160 is merely a procedural requirement, and keepingin view the provisions of Section 64(1A), section 160(1)(ii) wouldbe pressed into service only in the event of the minor child beingphysically or mentally challenged, or being a model or earning moneyfrom coaching classes or the like.Actually you are being conservative and I am being a littleadventurous here. But I reiterate that minor's income cannot bebrought to tax in his own hands UNLESS it is in those exceptionalcases; and your case isn't one of those exceptions.Still you can go ahead and apply the minor's PAN; have the incomeassessed in his hands; and let his maternal uncle sign the return.If you want I can send you a copy of the R P Sarathy judgement. Thisissue has been discussed very thoroughly in there.Thanks,CA Sanjeev Bedi--- In http://finance.groups.yahoo.com/group/ICAI_CIRC_MEERUT_CA/post?postID=gm9FvEDDmG3YIx__EWyLsm96Fbo8iW0nu-wnLDzzYrANsir76W8zsepLANuuDXI7f1BkdBKhpPQGOgd4WPCVwHxgIDGL4OnIGHQ, "Piyush Jain" wrote:>> Dear Sir Mr. Sanjeev Bedi,> First of all I want to extend my sincere thanks for your detailedkind reply. Sir, I am fully agreed with your view that in case ofthe minor (whose both of the parents have deceased) clubbingprovisions would not be attracted. But I am not satisfied with yourview that interest income to such minor would not be taxableat all. In my view nowhere in Income Tax Act ithas been mentioned that the income of the minor would be exempt fromtax. While section 64(1A) specifies the conditions in which theclubbing provisions would be attracted, proviso to section 64(1A)specifies only the conditions in which the clubbing provisions shallnot be attracted. > In my view in the given situation (when both of the parents of theminor have deceased), the income tax return should be filled throughrepresentative assessee.> My view is strengthen by the following considerations:> 1. The definition of theassessee given u/s 2(7): "assessee means a person by whom any tax orany other sum of money is payable under this Act, andincludes…………………………………"> 2. The definition of theperson given u/s 2(31):……………….. "person inclues :- (i) anindividual………………………………………………………………………………..">> 3. In case of the minornormally minors' FDRs a/c with bank are opened only under theguardianship of any person who is major. In such case the provisionspertaining to representative assessee as contained u/s 160(1)(ii) and u/s 161 shall be relevant.>> In my view in the given situation PAN of minor should be appliedthrough representative assessee and after that income tax return ofsuch minor should also be filed through representative assessee. Theguardian of the minor can be his representative assessee.> So, In my view if the income tax return of the minor is so filedthen it would be a proper compliance of the act and it would notattract the clubbing provisions.> Sir, I humbly request you to guide me whether I am thinkingin the right direction or not. For last over one year I have been avery careful reader of all of your replies. I have learned a lot byreading your mails. This is the first time that I am interactingwith you. I am very eagerly waiting for your reply.

With Warm Regards.>

CA. Piyush Jain (Rishikesh) >> >>> >