COMMISSIONER OF INCOME TAX Vs. B K BIRLA

JUDGEMENT

(1.) This is a reference under Section 256(1) of the Income-tax Act, 1961. The assessment for the assessment year 1966-67 was reopened under Section 147 of the Income-tax Act, 1961, on the ground that income had escaped assessment as the speculation income earned in the name of Kumari Manjusri Birla, the daughter of the assessee, really belonged to the assessee. Kumari Manjusri Birla, the daughter of the assessee, was a minor during the assessment year 1966-67. She had a bank account in her name. The assessee as guardian of his minor daughter transacted speculation business In shares through the brokers, M/s. Kothari Trading Co. Ltd. and M/s. Jhawar & Co. The Income-tax Officer examined the two brokers to enquire at whose instructions those transactions were entered into. They replied that the contracts were made on the instructions of the assessee. The assessee's contention against the inclusion of the speculation income in the name of Kumari Manjusri Birla was that the income had been deposited in the bank account of the minor and that she was the real beneficiary and that the income did not belong to him. The Income-tax Officer, however, was of the opinion that it was the assessee who had applied his own skill in doing the speculation business. The income really belonged to him. According to him, the minor could not do that business. The Income-tax Officer, therefore, included the speculation income of Rs. 9,020 earned in the name of Kumari Manjusri Birla in the assessment of the assessee. When the matter came up in the appeal before the Appellate Assistant Commissioner, it was urged that the assessee had done the speculation business of the minor as guardian of his minor daughter and that she was the real beneficiary. It was urged that even if the business was illegal, the income was assessable in the hands of the minor daughter. This contention found favour with the Appellate Assis. tant Commissioner and he deleted the addition of Rs. 9,020 from the income of the assessee.

(2.) Aggrieved by the order of the Appellate Assistant Commissioner, the Department came up in appeal before the Appellate Tribunal. The Tribunal after considering the rival submissions observed that there was a bank account in the name of Kumari Manjusri Birla which showed that the minor had her own capital. The business was done by the assessee as guardian of his minor daughter. It observed that the Income-tax Officer made enquiry from the brokers who supported the assessee's contention on this point. According to the Tribunal, the guardian of the minor had the authority to do the business on behalf of the minor, though he could not embark upon a new hazardous business so as to burden the estate with the risk of that business. The Tribunal then observed that speculation business in shares was not by itself illegal but even if in doing that business for the minor daughter, the assessee could not legally bind the estate of the minor, the illegality of that business did not affect the liability. The Tribunal observed that the guardian who carried on the business of the minor no doubt applied his mind but did business on behalf of the minor and not his own business and he could only be assessed in respect of the income of the minor from that business in a representative capacity and no personal assessment could be made on the guardian in respect of such income. The Tribunal held that in the present case, there was no material to show that the business really belonged to the assessee and not to the minor daughter as the brokers supported the assessee's contention that the business belonged to the minor daughter, though the transactions were done by the assessee. The Tribunal held that the income earned by the guardian from the speculative business carried on by him in the name of the minor belonged to the minor. The Tribunal did not find any reason to interfere with the order of the Appellate Assistant Commissioner.

(3.) On the aforesaid facts, the following question of law has been referred to this court :