Minor's income; Parents no more

Hi Piyush,

With the death of both the parents, the clubbing provisions ofSection 64(1A) go out the window. Even if the parents divorce,clubbing provisions still hold; the kid's income is clubbed alongthe income of the parent who maintains the kid. But in theunfortunate event of both Mummy and Daddy Allah-ko-piara hoeing,there's no way you can club the child's income with any of hisuncles, aunties or grandparents.Consider the following judgement of Chennai Tribunal in the case ofR.P. Sarathy v. Joint CIT [2005] 97 TTJ (Chennai) 801; [2006] 5 SOT731 (CHENNAI):[Facts:The parents of the assessee, who was a minor, died in an accident inJune/July 1993. Her grandfather sent her to school under hisguardianship. She inherited movable and immovable properties of thedeceased parents and also from her grandmother. The amounts receivedby her by way of inheritance and gifts on birthdays were invested byher grandfather. For the relevant assessment years she computed herincome and filed nil return on the ground that the income of minorwas not taxable. The Assessing Officer, however, assessed the entireincome in the hands of the legal representatives of the assessee. Onappeal, the Commissioner (Appeals) confirmed the action of theAssessing Officer.]On appeal the Tribunal held that none of the exceptions (divorce orpersonal skill of the minor) applied to the assessee as neither ofthe parents was surviving. The minor was not liable to file thereturn of income as per the provisions of the Act, in case both theparents were not alive. Section 64(1A) does not speak about thesituation where both the parents are not surviving. But fromExplanation (b) to sub-section (1A) of section 64, it can be easilyconferred that the minor's income, in case both the parents are notalive, cannot be assessed in the hands of the grandparent or anyother relatives. Further, there is no provision to assess theminor's income in the hands of the minor and if the parents do notsurvive, then that income cannot be clubbed in the hands of any ofhis grandparents or anybody who maintains the minor child. Since theparents of the minor were not surviving in the instant case in hand,the income of the minor could not be clubbed in the hands of hergrandfather. Accordingly, the orders of the lower authorities werequashed.]So it is clear that in the absence of both the parents, clubbing isruled out. The above judgement also correctly says that there is noprovision to assess the minor's income in the hands of the minorhimself, barring that manual skill/child prodigy exception. So doesthat mean in the instant case, nothing would be brought to tax onthe interest earned on FDRs created out of insurance proceedsreceived from the LIC consequent to the death of the parents?The answer it seems, also taking the ratio of the above ruling intoaccount, is: Yes. It seems the lawmakers, whilst they did visualizethe divorce and the child prodigy situations, forgot to think of asituation where both the parents depart for their heavenly abodeleaving the underage kid behind. What would happen to the survivingminor child's income?In my opinion, it won't be taxable at all.

Thanks,CA Sanjeev Bedi--- In

ICAI_CIRC_MEERUT_CA@yahoogroups.com, "Piyush Jain" wrote:>> Dear All,> Please guide me in following matter:> One minor has received plenty of funds from LIC due to the deathof his both of the parents. At present the said minor child is underthe guardianship of his maternal uncle. The amount of funds soreceived is proposed to be invested in bank FDRs. In whose incomethis interest income would be clubbed. Whether, in such case, sincedue to the death of the both of the parents, can return of the minorbe filed through any representative assessee without attracting theclubbing provisions u/s 64(1A).> I shall be very thankful for the kind guidance in the aforesaidmatter.> With Regards.> CA. Piyush Jain (Rishikesh)>