RANI RAJENDRA KUMARI BA Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THIS petition under Article 226 of the Constitution is directed against an order dated December 31, 1971, passed under Section 154/155 of the Income-tax Act, 1961.

(2.) THE assessee is a partner in a firm called "M/s. Rajendra Silica works". She had also income from royalty, interest on securities, ground rent and property. For the past several years the petitioner is being assessed to income-tax in respect of the income arising to her from her share in the partnership firm. THE income from other sources is being assessed in the hands of her husband under Section 16(3)(a)(iii) of the Indian Income-tax Act, 1922, and since the coming into force of the Income-tax Act, 1961, is being assessed under Clause (iii) of Section 64 of that Act, presumably because the income from those sources arises to the petitioner from assets transferred to her by her husband. Similar assessments were made in respect of the assessment year 1967-68, when the income arising from the partnership was assessed in the hands of the petitioner, while the income arising from other sources was assessed in the hands of her husband. Later on, the Income-tax Officer appears to have formed the opinion that by virtue of the Explanation attached to Section 64 of the Income-tax Act, 1961, the income from zamindari abolition bonds and royalties, etc., which was previously assessed in the hands of the husband should have been included in the income of the petitioner as her income was greater. He, accordingly, issued a notice under Section 151 with a view to rectify the assessment order. THE assessee objected to the proposed rectification. But the Income-tax Officer did not accept her objection and finally passed an order on December 31, 1971. THE original assessment order had taken the share income of the assessee from the partnership business proovisionally at Rs. 15,000 subject to rectification on the assessment of the firm. It appears that in the meantime the assessment of the firm had been completed and the share income of the assessee was found to be Rs. 29,270. THE Income-tax Officer, accordingly, passed a composite order under Section 154/155 of the Income-tax Act, 1961, computing the total income of the assessee as under: <FRM>JUDGEMENT_268_ITR93_1974Html1.htm</FRM>

(3.) ADMITTEDLY, the instant case falls under Clause (iii) of Section 64. The income arising to the petitioner from sources other than her share in the partnership are included in the assessment of her husband on the finding that such income arises from the assets transferred by the husband to the petitioner without adequate consideration. The Explanation attached to Section 64 provides that the individual to whose income the addition is to be made may be either the husband or the wife depending upon as to whose income is greater. Similarly, the income of a minor child may be added to the income of either the father or the mother where both are members of the firm depending on as to whose income is greater. The Explanation has no application to Clauses (iii), (iv) and (v). In such cases the income arising from the assets transferred without adequate consideration is to be added in the hands of the transferor and not in the hands of the transferee, even if the latter's income happens to be greater. It is thus clear that the Explanation has no application to the petitioner's case. The impugned order, therefore, is manifestly erroneous to that extent. The rectification of the income of the petitioner arising from her membership in the partnership firm is in order and has not been challenged.