My ward is a minor whose parents are both dead. There is no parent to club her income with, so is her income simply not taxable at all until she turns eighteen?
No. Section 64(1A) is a machinery provision, not a charging provision, so the absence of a parent does not take the minor's income out of charge. Where there is no parent to club with, s.160(1)(ii) applies and the guardian or manager of the minor is the representative assessee, bound to return that income and discharge the tax on it.
Decided by the High Court (Dr Vineet Kothari J and C.V. Karthikeyan J) on 2019-03-20, reported as T.C.A. Nos. 886 to 892 of 2007 and T.C.A. Nos. 1282 to 1288 of 2008 (Madras High Court); judgment reserved 13 March 2019, delivered 20 March 2019. It bears on section 64(1A), section 64, section 160(1)(ii), section 160, section 159 of the Income Tax Act 1961, in Assessment & Scrutiny and How Tax Law Is Read matters.
This is the answer to a real and recurring situation — an orphaned minor, or a minor whose income arises where the Explanation to s.64(1A) has nothing to operate on — and the Tribunal had gone the other way, holding the income untaxable for want of a parent. The High Court reversed that. The wider proposition matters beyond the facts: because s.64(1A) is machinery and not charge, an argument that the clubbing mechanism cannot be worked does not convert taxable income into exempt income; it only shifts the question of who must answer for it.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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A minor girl became entitled to property following the death of both her parents, and income arose to her from agricultural sources, a money-lending business and a share from a partnership firm carrying on a coffee business. Her grandfather acted as her guardian. The Revenue assessed the income; the assessee contended that after the insertion of s.64(1A) with effect from 1 April 1993 the income of a minor could be brought to tax only by clubbing it in the hands of one of the parents, and that since both parents had died the clubbing provisions could not operate, with the result that the income could not be taxed at all. The Tribunal accepted that contention and did not impose tax on the income from the money-lending business and the share from the partnership firm. Both sides appealed — the assessee in T.C.A. Nos. 886 to 892 of 2007 and the Revenue in T.C.A. Nos. 1282 to 1288 of 2008.
The assessee's appeals were dismissed and the Revenue's appeals were allowed (para 39). Section 64(1A) is not a charging provision; it was enacted as an anti-evasive machinery measure obliging the parent to discharge the tax obligation in respect of the minor's income (para 32). Where the parents are not available, s.160(1)(ii) is attracted and the guardian — here the grandfather — becomes the representative assessee liable to discharge all the tax obligations under the Act on behalf of the minor (paras 28 and 32). The insertion of sub-section (1A) by the Finance Act 1992 did not mean that income taxable in the hands of a minor was brought to tax for the first time with effect from 1 April 1993 (para 32).
The Court recorded that the validity of s.64(1A) was beyond doubt and that the only question was the character of the provision (para 27). It held that what had escaped the attention of counsel and of the authorities below was the existence of ss.159 and 160, and in particular s.160(1)(ii), which provides that in respect of the income of a minor, lunatic or idiot, the guardian or manager shall be the representative assessee, and is therefore under an obligation to return such income and discharge the tax obligations of persons who are incapacitated in the eye of contract law (para 28). Reading s.64(1A) as machinery, the Court explained that the sub-section was introduced to add the minor's income to the income of the parent having the higher taxable income in order to stop parents using minors as a shelter — the only exception being income the minor earns by his or her own skills, which is taxed in the minor's own hands — so that when there is no parent, the obligation simply devolves on the guardian under s.160(1)(ii) rather than falling away (para 32).
The clubbing provisions are, therefore, nothing but machinery provisions to obligate the parent of the child to discharge the tax obligations in respect of income arising or accrued to the minor child.
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Handle my notice → Ask a CA on WhatsAppNo. Section 64(1A) is a machinery provision, not a charging provision, so the absence of a parent does not take the minor's income out of charge. Where there is no parent to club with, s.160(1)(ii) applies and the guardian or manager of the minor is the representative assessee, bound to return that income and discharge the tax on it. This was decided by the High Court (Dr Vineet Kothari J and C.V. Karthikeyan J) and bears on section 64(1A), section 64, section 160(1)(ii), section 160, section 159 of the Income Tax Act 1961. It is reported as T.C.A. Nos. 886 to 892 of 2007 and T.C.A. Nos. 1282 to 1288 of 2008 (Madras High Court); judgment reserved 13 March 2019, delivered 20 March 2019. This is the answer to a real and recurring situation — an orphaned minor, or a minor whose income arises where the Explanation to s.64(1A) has nothing to operate on — and the Tribunal had gone the other way, holding the income untaxable for want of a parent. The High Court reversed that. The wider proposition matters beyond the facts: because s.64(1A) is machinery and not charge, an argument that the clubbing mechanism cannot be worked does not convert taxable income into exempt income; it only shifts the question of who must answer for it. If it applies to you, the first step is this: Where a minor has income and no parent whose total income can be compared, file the return through the guardian or manager as representative assessee under s.160(1)(ii) rather than not filing at all.
A minor girl became entitled to property following the death of both her parents, and income arose to her from agricultural sources, a money-lending business and a share from a partnership firm carrying on a coffee business. Her grandfather acted as her guardian. The Revenue assessed the income; the assessee contended that after the insertion of s.64(1A) with effect from 1 April 1993 the income of a minor could be brought to tax only by clubbing it in the hands of one of the parents, and that since both parents had died the clubbing provisions could not operate, with the result that the income could not be taxed at all. The Tribunal accepted that contention and did not impose tax on the income from the money-lending business and the share from the partnership firm. Both sides appealed — the assessee in T.C.A. Nos. 886 to 892 of 2007 and the Revenue in T.C.A. Nos. 1282 to 1288 of 2008. The matter was decided on 2019-03-20 by the High Court (Dr Vineet Kothari J and C.V. Karthikeyan J). On those facts the High Court held as follows. The assessee's appeals were dismissed and the Revenue's appeals were allowed (para 39). Section 64(1A) is not a charging provision; it was enacted as an anti-evasive machinery measure obliging the parent to discharge the tax obligation in respect of the minor's income (para 32). Where the parents are not available, s.160(1)(ii) is attracted and the guardian — here the grandfather — becomes the representative assessee liable to discharge all the tax obligations under the Act on behalf of the minor (paras 28 and 32). The insertion of sub-section (1A) by the Finance Act 1992 did not mean that income taxable in the hands of a minor was brought to tax for the first time with effect from 1 April 1993 (para 32).
The Court recorded that the validity of s.64(1A) was beyond doubt and that the only question was the character of the provision (para 27). It held that what had escaped the attention of counsel and of the authorities below was the existence of ss.159 and 160, and in particular s.160(1)(ii), which provides that in respect of the income of a minor, lunatic or idiot, the guardian or manager shall be the representative assessee, and is therefore under an obligation to return such income and discharge the tax obligations of persons who are incapacitated in the eye of contract law (para 28). Reading s.64(1A) as machinery, the Court explained that the sub-section was introduced to add the minor's income to the income of the parent having the higher taxable income in order to stop parents using minors as a shelter — the only exception being income the minor earns by his or her own skills, which is taxed in the minor's own hands — so that when there is no parent, the obligation simply devolves on the guardian under s.160(1)(ii) rather than falling away (para 32). In the words reproduced by the source cited on this page: "The clubbing provisions are, therefore, nothing but machinery provisions to obligate the parent of the child to discharge the tax obligations in respect of income arising or accrued to the minor child."
It was decided by the High Court on 2019-03-20 and is reported as T.C.A. Nos. 886 to 892 of 2007 and T.C.A. Nos. 1282 to 1288 of 2008 (Madras High Court); judgment reserved 13 March 2019, delivered 20 March 2019. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 64(1A), section 64, section 160(1)(ii), section 160, section 159, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The assessee's appeals were dismissed and the Revenue's appeals were allowed (para 39). Section 64(1A) is not a charging provision; it was enacted as an anti-evasive machinery measure obliging the parent to discharge the tax obligation in respect of the minor's income (para 32). Where the parents are not available, s.160(1)(ii) is attracted and the guardian — here the grandfather — becomes the representative assessee liable to discharge all the tax obligations under the Act on behalf of the minor (paras 28 and 32). The insertion of sub-section (1A) by the Finance Act 1992 did not mean that income taxable in the hands of a minor was brought to tax for the first time with effect from 1 April 1993 (para 32). It arises in Assessment & Scrutiny and How Tax Law Is Read matters, on section 64(1A), section 64, section 160(1)(ii), section 160, section 159 of the Income Tax Act 1961, and was decided by Dr Vineet Kothari J and C.V. Karthikeyan J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not run the argument that s.64(1A) charges the income and therefore, absent a parent, there is no charge — the Court called that submission unpalatable and unacceptable. Where the minor's own skill produced the income, keep it in the minor's hands under the proviso; the Court expressly records that such income is taxed in the minor's own hands without attracting clubbing. If an assessment has already been framed in the minor's own hands through a guardian, do not assume it is void merely because s.64(1A) was not applied.
Validity check could not be completed. Validity check could not be completed. No later treatment of this 2019 judgment was searched for, and it is not known whether an appeal to the Supreme Court was filed. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The paragraph numbers cited here (27, 28, 32) and the disposal (39) were transcribed from the judgment, but the intervening paragraphs 29 to 31 and 33 to 38 were not reached, so this entry does not assert that the numbering is continuous. The Tribunal order under appeal is at https://indiankanoon.org/doc/425865/ (ITAT Chennai, 2 September 2005), which was not read. The judgment as read gives no ITR citation. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The assessee's appeals were dismissed and the Revenue's appeals were allowed (para 39). Section 64(1A) is not a charging provision; it was enacted as an anti-evasive machinery measure obliging the parent to discharge the tax obligation in respect of the minor's income (para 32). Where the parents are not available, s.160(1)(ii) is attracted and the guardian — here the grandfather — becomes the representative assessee liable to discharge all the tax obligations under the Act on behalf of the minor (paras 28 and 32). The insertion of sub-section (1A) by the Finance Act 1992 did not mean that income taxable in the hands of a minor was brought to tax for the first time with effect from 1 April 1993 (para 32).
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