ANNAMALAI N Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a consolidated reference in respect of the assessment year 1961-62. One S. RM. S. Narayanan Chettiar acted as the guardian of his four minor sons in carrying on money-lending business in their names. The Tribunal has held by a curious reasoning that the income derived from the business should be charged under Section 12 of the Income-tax Act, 1922. It referred to Section 2(6AA) and Section 40 and thought that, inasmuch as the minors, because of their inability for the reason, could rot by themselves carry on the business, the income derived from the business should be treated as unearned income and charged to tax under Section 12. It felt that Section 40 merely provided for recovery of tax on the income of a minor from the guardian in the same manner in which it could have been recovered from the minor himself if he was a major and that what the law prohibited could not be acted upon with the result that the income from the business, though it belonged to the minors, could not be regarded as derived from a business carried on by them. At the instance of the assessee we have in the reference the following questions:

(2.) WE have no hesitation in answering the questions in favour of the assessees. When the business belonged to the minors and because of their minority they could not by themselves run the business, necessarily they had to depend on a representative who would on their behalf carry it on. The guardian is but a representative of the minors and does not carry on the business on his own behalf. This principle is recognised by Section 40, Though minors and lunatics do not and cannot carry on business by themselves because of the disability clamped on them by the law, the law allows them to carry on the business through representatives as a guardian or next friend. It is only on that basis that the guardian is assessed on the income of the minor.