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Mother is natural guardian even during lifetime of father; clubbing provisions not unconstitutional

Written By Admin on Monday, 2 December 2013 | Monday, December 02, 2013

HIGH COURT OF PUNJAB AND HARYANA
Anju Mehra
v.
Union of India*

SATISH KUMAR MITTAL AND T.P.S. MANN, JJ.
C.W.P. NO. 13510 OF 2003
MARCH  22, 2012 



Section 64 of the Income-tax Act, 1961, read with section 6 of the Hindu Minority and Guardianship Act, 1956 [Constitutional validity] - Assessment years 1993-94 and 1994-95 - Whether since under Hindu law both mother and father are natural guardians of minor sons or daughter, it cannot be said that mother is not natural guardian during lifetime of father - Held, yes - Whether, therefore, it cannot be said clause (a) of Explanation to section 64(1A) which provides that for purposes of this sub-section, income of minor child shall be included where marriage of his parents subsists, in income of that parent whose total income is greater, is contrary to provisions of section 6 of Hindu Minority and Guardianship Act and violative of article 14 of Constitution - Held, yes - Whether, therefore, sub-section (1A) of section 64, including clause (a) of Explanation to said sub-section is constitutionally valid - Held, yes [Para 5] [In favour of revenue]

FACTS

The assessing authority completed the assessment of the assessee under section 143(3) by clubbing the income of two minor sons of the assessee with the income of the assessee in her hands as her income was greater than that of her husband.
The assessee filed instant writ petition challenging constitutional validity of section 64(1A). It was the case of the assessee that the provisions of clubbing the income of the minor child, which is earned by the said minor in his or her own right, in the income of the parents infringed the right of equality as enshrined by article 14 of the Constitution of India and, thus, ultra vires. It was further the case of the assessee that clause (a) of Explanation to section 64(1A) which provides that for the purposes of this sub-section, the income of the minor child shall be included where the marriage of his parents subsists, in the income of that parent whose total income is greater, was violative of section 6 of the Hindu Minority and Guardianship Act, 1956, according to which, the father is the natural guardian and after him the mother is the natural guardian.
On writ petition:

HELD

The High Court in K.M. Vijayan v. Union of India [1995] 215 ITR 371/[1996] 85 Taxman 75 (Mad.)(FB)K.V. Kuppa Raju v. Government of India [2000] 242 ITR 522/[2002] 123 Taxman 926 (Kar.) upheld the constitutional validity of provisions of section 64(1A). In view of the aforesaid decisions, the assessee could not point out any illegality to the provisions of clubbing the income of the minor child, earned by him in his own right, in the income of the parents, but the assessee questioned that such income can only be clubbed in the income of the father, who is the natural guardian of the minor child under section 6 of the Hindu Minority and Guardianship Act. [Para 19]

In view of interpretation by the Supreme Court in Githa Hariharan v. Reserve Bank of India [1999] 236 ITR 380/104 Taxman 220, under the Hindu law both mother and father are the natural guardians of the minor sons or daughters. It cannot be said that the mother is not the natural guardian during the lifetime of the father or until he is disqualified from being the natural guardian. If that is so, then the contention raised by the assessee that clause (a) of Explanation to section 64(1A) which provides that for the purposes of this sub-section, the income of the minor child shall be included where the marriage of his parents subsists, in the income of that parent whose total income is greater, is contrary to the provisions of section 6 of the Hindu Minority and Guardianship Act and violative of article 14 of the Constitution does not arise. The object of the impugned provision is to tax the minor's income in the hands of the parents whose income is greater by clubbing the income of the minor in his or her own right. When both mother and father are natural guardians, then adding the income of the minor child in the income of the parent, whose income is greater, cannot be said to be arbitrary, artificial or evasive of the object sought to be achieved. [Para 22]

Thus, in view of the foregoing reasons, the Court would uphold the constitutional validity of sub section (1A) of section 64, including clause (a) of Explanation to the said sub-section. The Legislature was within its right to enact these provisions and the same are not violative of article 14 of the Constitution of India or section 6 of the Hindu Minority and Guardianship Act. [Para 23]

JUDGMENT

Satish Kumar Mittal, J. - In the present writ petition, the petitioner, who is the income-tax assessee and in whose hands the income of her two minor sons has been clubbed in view of the provisions of section 64(1A) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), has challenged the constitutional validity of section 64(1A) of the Act, which was introduced in section 64 of the Act by the Finance Act, 1992, with effect from April 1, 1993.

2. Prior to the assessment year 1993-94, the petitioner, her husband and their two minor sons were filing their separate income-tax returns and they were being assessed separately. The income of the minor sons was not being clubbed either in the income of the petitioner or her husband. For the assessment years 1993-94 and 1994-95, the petitioner filed her income-tax returns declaring a total income of Rs. 1,23,610 and Rs. 1,77,560, respectively. While filing the said returns, the petitioner had added a note to her returns that she had not included in her income, the income of her two minor sons arising in their own right and without the aid of any assets or funds provided by her to them directly or indirectly.

3. The assessing authority completed the assessment of the petitioner under section 143(3) of the Act at Rs. 3,53,832 (her income and income of the minor sons) for the assessment year 1993-94 and at Rs. 4,55,860 (her income and income of the minor sons) for the assessment year 1994-95 by clubbing the income of two minor sons of the petitioner with the income of the petitioner in her hands as her income was greater than that of her husband.

4. The aforesaid assessment order was upheld in appeal by the Commissioner of Income-tax (Appeals), Amritsar, and in second appeal by the Income-tax Appellate Tribunal.

5. The appeals filed by the petitioner against these two assessment orders under section 260A of the Act bearing I. T. A. Nos. 269 of 2005 and 270 of 2005 are pending in this court. However, she was advised to contest the validity of the provisions of section 64(1A) of the Act which provides for inclusion of income of the minor child in the total income of the parents whose total income is greater.

6. Prior to the assessment year 1992-93, as per the provisions of section 64(1)(v) of the Act, any income of the minor child, arising from the assets transferred directly or indirectly by the parents was to be clubbed in the hands of the parent who had made such direct or indirect transfer.

7. Clause (v) of section 64(1) of the Act reads as under :

"Subject to the provisions of clause (i) of section 27, in a case not falling under clause (iii) of this sub-section, to a minor child of such individual, from assets transferred directly or indirectly to the minor child by such individual otherwise than for adequate consideration."

8. Vide Finance Act, 1992, this clause was omitted with effect from April 1, 1993.

9. After deleting the aforesaid clause, sub-section (1A) was introduced in section 64 of the Act with effect from April 1, 1993, which reads as under :

"(1A) In computing the total income of any individual, there shall be included all such income as arises or accrues to his minor child :

Provided that nothing contained in this sub-section shall apply in respect of such income as arises or accrues to the minor child on account of any—

(a) manual work done by him ; or
(b) activity involving application of his skill, talent or specialised knowledge and experience.
Explanation.—For the purposes of this sub-section, the income of the minor child shall be included,—

(a) where the marriage of his parents subsists, in the income of that parent whose total income (excluding the income includible under this sub-section) is greater ; or
(b) where the marriage of his parents does not subsist, in the income of that parent who maintains the minor child in the previous year, and where any such income is once included the total income of either parent, any such income arising in any succeeding year shall not be included in the total income of the other parent, unless the Assessing Officer is satisfied, after giving that parent an opportunity of being heard, that it is necessary so to do."
10. The reason for introduction of section 64(1A) of the Act was explained in the provisions of Finance Bill, 1992, which reads as under (see [1992] 194 ITR (St.) 32, 179) :

"In reality as well as in law, the minor children cannot administer their property nor can they take decisions on the disposal of income arising therefrom. These responsibilities fall on the parents, who, for all practical purposes, treat and use this income as part of their own income. Exclusion of minor children's income from the income of their parents also leads to tax avoidance."

11. The reason for introduction of section 64(1A) of the Act was further explained in Circular No. 636, dated August 31, 1992 issued by the Central Board of Direct Taxes, which reads as under (see [1992] 198 ITR (St.) 1, 31) :

"36.1 In reality as well as in law, the minor children cannot administer their property nor can they take decisions on the disposal of income arising therefrom. These responsibilities fall on the parents, who, for all practical purposes treat and use this income as part of their own income. Exclusion of minor children's income from the income of their parents also leads to tax avoidance. The aforesaid provisions of section 64 with regard to clubbing of minors' income had also led to litigation between Income-tax Department and the assessees."

12. The effect of this insertion is that all the incomes of the minor child, whether earned in his/her own right or not, are clubbed with the income of the father or mother, whose income is greater.

13. It is the case of the petitioner that the provisions of clubbing the income of the minor child, which is earned by the said minor in his or her own right, in the income of the parents infringes the right of equality as enshrined by article 14 of the Constitution of India and, thus, ultra vires. According to the learned counsel, the parent who pays tax on the income of the minor, is also in certain cases, charged at a higher rate on his own income due to the said clubbing, cannot recover the same from the said minor.

14. It is further the case of the petitioner that clause (a) of Explanation to section 64(1A) which provides that for the purposes of this sub-section, the income of the minor child shall be included where the marriage of his parents subsists, in the income of that parent whose total income is greater, is violative of section 6 of the Hindu Minority and Guardianship Act, 1956, according to which, the father is the natural guardian and after him the mother is the natural guardian. The learned counsel argued that the purpose of bringing the amendment was to tax the minor's income because it was suggested that in reality and under the law, minors cannot administer their property and the responsibility fall on the parents who allegedly for all practical purposes treat and use this income as part of their income. Learned counsel argued that this purpose could have been achieved by adding the income of the minor in the hands of the natural guardian, who is the father, but by clubbing the income of the minor in the income of the mother, who, according to section 6 of the Hindu Minority and Guardianship Act, is not the natural guardian, is violative of article 14 of the Constitution of India.

15. We have heard the learned counsel for the parties.

16. In the present writ petition, the following two points have been raised for consideration of this court :

"(i) Whether the provisions of sub-section (1A) of section 64 of the Act, which provide for clubbing of the income of the minor child, earned in his/her own right or not, in the income of the parents, is against the provisions of article 14 of the Constitution of India ? and
(ii) Whether the clubbing of such income of the minor in the income of the mother, who is not the natural guardian, but on the ground that her income is greater, is unconstitutional being violative of section 6 of the Hindu Minority and Guardianship Act ?"
17. The question of validity of sub-section (1A) of section 64 of the Act as a whole came up for consideration before the Madras High Court in case of K.M. Vijayan v. Union of India [1995] 215 ITR 371/[1996] 85 Taxman 75 [FB]. The Full Bench of the Madras High Court has upheld the constitutional validity of the said provisions, while observing as under (headnote) :

"A tax law like any other law must also satisfy the conditions : (i)that the Legislature was competent to enact it ; and (ii) that it does not infringe any of the fundamental rights. However, there is always a presumption in favour of the constitutionality of a statute and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. If the Legislature feels that there is a possibility of evasion of one's income by showing it as the minor's income and to avoid such evasion the clubbing of income earned by a minor through a particular source with the income of the father cannot be said to fall outside the legislative power to enact a law on income-tax. The main object behind the enactment of section 64(1A) is that all the income of a minor should be clubbed with the income of the parent (except that which has been excluded specifically), since for all practical purposes, the parent treats and uses the minor's income as part of his or her own income. If section 64(1A) is at least partially an anti-avoidance measure, it would fall under entry 82 of List I of Schedule VII to the Constitution itself. If it is not an antiavoidance measure, even then, Parliament will be entitled to enact such a provision in view of article 248 and entry 97 of List I.

What is necessary in order to pass the test of permissible classification under article 14 is that the classification must not be 'arbitrary, artificial or evasive' but must be based on some real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved by the Legislature. There is no palpable arbitrariness in section 64(1A) and hence it does not offend article 14 of the Constitution.

The Legislature is competent to tax a person on the income belonging to another person. In such circumstances, the person who earned the income and the person on whom tax is levied both cannot claim the benefits provided under the Act. Therefore, if two assessments are made individually on the minor and his parent, both of them cannot claim to be entitled to the benefits provided under the various provisions of the Act. Such benefits are curtailed because of the introduction of sub-section (1A) of section 64 of the Act."

18. Again, the same question came up for consideration before a Division Bench of the Karnataka High Court in K.V. Kuppa Raju v. Government of India [2000] 242 ITR 522/[2002] 123 Taxman 926, which upheld the constitutional validity of the provisions of sub-section (1A) of section 64 of the Act, while observing as under (headnote) :

"In order to pass the test of permissible classification under article 14, the classification must not be arbitrary, artificial or evasive but must be based on some real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved by the Legislature. Section 64(1A) of the Income-tax Act, 1961, was inserted by the Finance Act, 1992, with effect from April 1, 1993, i.e., the assessment year 1993-94. Section 64(1A) now covers all income of the minor (with the exception of earned income) irrespective of the fact whether there is a nexus between the earning of such income and the overt act of the parent. Section 64(1A) is a machinery provision. When provisions are made to block loopholes for any possible tax avoidance, the Legislature is competent to have a wider field of discretion not only for the substantive provision but for procedural provisions as well. Section 64(1A) is a provision for computation of income of an individual whose minor child is having income and that by itself constitutes a different class. Instead of providing a separate slab, it is provided that the income of such minor would be included in the income of the individual. There is no lack of competence in the Legislature for providing such a legislation. The object sought to be achieved is to tax the income and simply because by including the income of the minor in the hand of either of the parents, he or she has been subjected to a higher tax burden, it cannot be considered to be unconstitutional. There is no hostile discrimination between those minors whose income is not included in the income of their parent as they may not be assessable at all or may be assessable at a lower rate of tax as the individuals whose minor children have income have been considered a different class by themselves. If the Legislature has selected for the purpose of classification a group of persons who are in fact used as a cloak to perpetrate fraud on taxation the provisions cannot be considered to be violative of article 14 of the Constitution of India."

19. In view of the aforesaid decisions, the learned counsel for the petitioner has not pressed point No. 1 and could not point out any illegality to the provisions of clubbing the income of the minor child, earned by him in his own right, in the income of the parents, but the learned counsel questioned that such income can only be clubbed in the income of the father, who is the natural guardian of the minor child under section 6 of the Hindu Minority and Guardianship Act. According to the learned counsel, the adding of such income in the income of the mother during the lifetime of the father or particularly when the father does not stand disqualified from being the natural guardian, is arbitrary, artificial and evasive, and thus violates article 14 of the Constitution of India. The learned counsel argued that the object of the provisions of section 6 of the Hindu Minority and Guardianship Act can be well achieved by clubbing the income of the minor child in the income of the father, who is the natural guardian, but to provide that such income of the minor child is to be clubbed in the income of the mother whose income is greater, has nothing to do with the object sought to be achieved, as she is not the natural guardian.

20. After considering the submissions made by the learned counsel for the parties, we do not find any substance in the arguments raised by the learned counsel for the petitioner.

21. In Githa Hariharan v. Reserve Bank of India [1999] 236 ITR 380/104 Taxman 220 (SC), the hon'ble Supreme Court, while upholding the validity of section 6 of the Hindu Minority and Guardianship Act, where a claim was made that denial to the mother the right of being natural guardian is contrary to the dignity of woman and violative of article 14 of the Constitution of India, has held as under (page 395 of 236 ITR) :

"The expression 'natural guardian' has been defined in section 4(c) as noticed above to mean any of the guardians as mentioned in section 6 of the Act of 1956. This section refers to three classes of guardians, viz., father, mother and in the case of a married girl the husband. The father and mother, therefore, are natural guardians in terms of the provisions of section 6 read with section 4(c). Incidentally it is to be noted that in the matter of interpretation of statute the same meaning ought to be attributed to the same word used by the statute as per the definition section. In the event, the word 'guardian' in the definition section means and implies both the parents, the same meaning ought to be attributed to the word appearing in section 6(a) and in that perspective the mother's right to act as the guardian does not stand obliterated during the lifetime of the father and to read the same on the statute otherwise would tantamount to a violent departure from the legislative intent. Section 6(a) itself recognises that both the father and the mother ought to be treated as natural guardians and the expression 'after', therefore, shall have to be read and interpreted in a manner so as not to defeat the true intent of the legislature.

Be it noted further, that gender equality is one of the basic principles of our Constitution and in the event the word 'after' is to be read to mean a disqualification of a mother to act as a guardian during the lifetime of the father, the same would definitely run counter to the basic requirement of the constitutional mandate and would lead to a differentiation between male and female. Normal rules of interpretation shall have to bow down to the requirement of the Constitution since the Constitution is supreme and the statute shall have to be in accordance therewith and not de hors the same. The father by reason of a dominant personality cannot be ascribed to have a preferential right over the mother in the matter of guardianship since both fall within the same category and in that view of the matter the word 'after' shall have to be interpreted in terms of the constitutional safeguard and guarantee so as to give a proper and effective meaning to the words used.

In our opinion, the word 'after' shall have to be given a meaning which would sub-serve the need of the situation, viz., welfare of the minor and having due regard to the factum that law courts endeavour to retain the legislation rather than declaring it to be void, we do feel it expedient to record that the word 'after' does not necessarily mean after the death of the father, on the contrary, it depicts an intent so as to ascribe the meaning thereto as 'in the absence of'-be it temporary or otherwise or total apathy of the father towards the child or even inability of the father by reason of ailment or otherwise and it is only in the event of such a meaning being ascribed to the word 'after' as used in section 6 then and in that event the same would be in accordance with the intent of the legislation viz. welfare of the child."

22. In view of the aforesaid interpretation by the Supreme Court, under the Hindu law both mother and father are the natural guardians of the minor sons or daughters. It cannot be said that the mother is not the natural guardian during the lifetime of the father or until he is disqualified from being the natural guardian. If that is so, then the contention raised by the learned counsel for the petitioner that clause (a) of Explanation to section 64(1A) which provides that for the purposes of this sub-section, the income of the minor child shall be included where the marriage of his parents subsists, in the income of that parent whose total income is greater, is contrary to the provisions of section 6 of the Hindu Minority and Guardianship Act and violative of article 14 of the Constitution, does not arise. The object of the impugned provision is to tax the minor's income in the hands of the parents whose income is greater by clubbing the income of the minor in his or her own right. When both mother and father are natural guardians, then adding the income of the minor child in the income of the parent, whose income is greater, cannot be said to be arbitrary, artificial or evasive of the object sought to be achieved.

23. Thus, in view of the foregoing reasons, we uphold the constitutional validity of sub-section (1A) of section 64 of the Act, including clause (a) of Explanation to the said sub-section. In our view, the Legislature was within its right to enact these provisions and the same are not violative of article 14 of the Constitution of India or section 6 of the Hindu Minority and Guardianship Act. Thus, finding no merit in the petition, the same is hereby dismissed.

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