KAPOOR CHAND (DEAD) versus ASSTT. COMMNR. OF INCOME TAX

Citation: [2015] 10 S.C.R. 871 · Decided: 14-07-2015 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Appeal(s) allowed

Judgment (excerpt)

[2015] 10 S.C.R. 871 
KAPOOR CHAND (DEAD) 
v. 
ASSTT. COMMNR. OF INCOME TAX 
(Civil Appeal No. 67S of 2005) 
JULY 14, 2015 
[A.K. SIKRI AND N.V. RAMANA, JJ.] 
A 
B 
Income Tax Act, 1961 - s. 64(1) (iii), Explanation 2A -
Applicability of- Trust created for the benefit of minor children c 
- The two trustees (including the assessee) became partners 
in a partnership firm - Income arising to the Trust from the 
membership of the trustees in the firm - Whether taxable u/ 
s. 64(1) (iii) - Held: The income of a minor child is taxable at 
the hands of individual - However, in the present case, the D 
income has not accrued to the minors in the relevant 
assessment year, in view of the stipulation in the Trust-deeds 
that the income would be available to the minors on their 
attaining majority- Thus assessee's income was not taxable 
u/s. 64(1) (iii). 
E 
Allowing the appeal, the Court 
HELD: 1. It is clear from a plain reading of Section 
64(1) (iii) of Income Tax Act, 1961 that while computing F 
the total income of any individual, the income of a minor 
child of such individual from the admission of the minor 
to the benefits of partnership in a firm is to be included 
as the income of the said individual. The Explanation 
2A clarifies that if the minor child is a beneficiary under a G 
trust, income arising to the trust from the membership 
of the trustee in a firm shall also be treated as income of 
th~ child and provisions of sub-clause (iii) of Section 64 
(1) shall get attracted even in that eventuality. [Para 7] 
[875-H; 876-A,B] 
H 
871 
' 
872 
SUPREME COURT REPORTS 
[2015] 108.C.R. 
A 
2. The provision that is contained in Explanation 
2A is only to take care of the income, even when a trust 
is created. It does not go further and make any provision 
to the effect that even when the income earned by the 
trust cannot be utilized tor the benefit of the minor during 
B his minority the Explanation 2A shall be attracted. There 
is no such stipulation even in the said Explanation. 
Moreover, the language of Section 64 (1) (iii) is clear and 
categorical which makes the income of minor child 
taxable at the hands of individual. [Para 12] [879-B-D] 
c 
D 
3. The income which is not to be given or spent for 
the benefit of the child so long as he is minor, his income 
cannot be treated as income of a "minor child" and taxed 
at the hands of individual. [Para 9] [877-E-F] 
Commissioner of Income Tax vs. M.R. Doshi 
(211) ITR 1 (SC)- relied on. 
Yogindraprasad N. Mafatlal vs. Commissioner of 
E 
Income Tax, Bombay City-1109 ITR 602(Bom)-
referred to. 
4. 
In the present case one of the conditions 
contained in the trust deeds was that the income so 
F generated by the trust, shall not be given to or spent for 
the benefit of the minor children till they attain majority 
and the money was to be handed over to them only on 
attaining the majority which would mean that the income 
was available to these persons when they cease to be 
G the minors. Thus, the requirement that the share of 
income is at the hands of minor child is not satisfied in 
the present case. [Paras 8 and 12] [876-E-F; 879-D] 
5. The Department is not remedyless inasmuch as 
H the income earned by the two minors would not go 
KAPOOR CHAND (DEAD) v.ASST. COMMNR. OF 
873 
INCOME TAX 
untaxed. On attaining majority, when the aforesaid A 
money in the form of income is received by the two 
individuals, it would be open to the Department to tax 
the income at that time. Or else, the Department could 
take up their cases under Section 166 of the Act if 
permissible. However, that course of action was not · B 
taken by the Department in the present case. [Para 13] 
[879-E-F] 
(211) ITR 1 (SC) 
109 ITR 602(8oM) 
Case Law Reference 
relied on 
referred to 
para 8 
para 8 
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 675 
c 
of2005 
D 
From the Judgment and Order dated 24.10.2003 of High 
Court of Uttaranchal at Nainital in Income Tax Appeal No. 01 
of2003. 
Rohit Sthalekar, Avi Tandon, Kamlendra Mishra for the 
Appellant. 
Arijit Prasad, Anil Katiyar for the Respondent. 
E 
The Judgment of the Court was delivered by 
F 
A. K. SIKRI, J. 1. The facts in brief, which give rise to the 
present appeal filed by the assessee against. the impugned 
judgment dated 24.10.2003 passed by the High Court of 
Uttaranchal at Nainital, are as under: 
G 
2. The brother-in-law of the appellant, namely, Shri Ram 
Niwas Agarwal had created two trusts for the benefit of two 
minor 

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