Case: The Commissioner Of Income-Tax,Madras Vs. S. A. S. Marimuthu Nadar

2. The respondent, S. A. S. Marimuthu Nadar, was the manager of a Hindu undivided family. The family consisted of Marimuthu Nadar, his two major sons and two minor sons. On August 16, 1946, the family divided, and a firm came into existence. Marimuthu Nadar and his two major sons took 4/16th share each and the two minor sons were admitted to the benefits of partnership to the extent of 2/16th share each. For the assessment year, 1949-50 (the previous year ended on August 16, 1948) the share of profits of Marimuthu Nadar from the partnership was Rs. 9,812, while the share of profits of his two minor sons was Rs. 8,124 and Rs. 8,381. The income of the minors was added to the total income of Marimuthu Nadar under S. 16(3)(a)(ii) of the Income-tax Act. Marimuthu Nadar was granted earned income relief only to the extent of his own individual share of the profits from the partnership. In the assessment year, 1950-51, the elder of the two minor sons had become major, and it was only the share of the remaining minor son which was included in the total income of Marimuthu Nadar. In that year also, he was given earned income relief only on his share of the profits but not on the share of the profits of the minor son, which was included in his total income. Marimuthu Nadars share of profits was Rs. 12,344 and that of his minor son, Rs. 10,143.3. Marimuthu Nadar appealed to the Appellate Assistant Commissioner and also to the Appellate Tribunal; but his appeals were unsuccessful. At the instance of Marimuthu Nadar, the Tribunal referred the above question to the High Court for its decision. The High Court answered the question in the affirmative and in favour of the assessee. The Commissioner of Income-tax, Madras, has, therefore, appealed with a certificate under S. 66A(2) of the Indian Income-tax Act.

Reasoning: 4. There is no dispute about the amounts involved, nor about the inclusion of the share of the profits of the minors from the partnership, in the total income of thegeneral intention behind the section, in spite of its obscurity, is fairly clear. It is to give to an assessee, earned income relief in respect of the income of another person, included in his total income under the provisions of this Act. The only difficulty is about the conditions under which such relief is to be granted. The words of the last paragraph of the section are "and includes any such income", and the question is what income is indicated by the word "such". Three readings of the section were considered at the hearing; but one of them must be rejected as clearly not admissible. That reading is to take "such" back to the words "any income of an assessee" in the opening part of the definition. It is not necessary to give detailed reasons why this reading is not permissible. It is enough to say that if the latter part of the section is read in this extended form, it makes no sense.The two conditions were obviously satisfied by Marimuthu Nadar in respect of his own share of the profits from thecase of the other side is that so long as the father or the husband has worked actively as a partner, the income would be entitled to the relief, even though it was initially the income of the minor son or the wife. In the case of a minor, the position is clear, because a minor cannot be a partner actively engaged in the conduct of the business, and it is impossible that the section is meant to apply to a minor only when a minor is engaged actively in business as a partner. In the case of a wife, however, the matter is not so simple, because the wife may be actively engaged in the conduct of the business with her husband or the husband may be dormant. If the wife is actively, engaged and the husband is not, on the reading suggested by the assessee, earned income relief would not be admissible to the husband, but on the reading suggested by the Department, it would be. If the husband is actively engaged in the business but the wife is not, then according to the reading suggested by the assessee, the husband would be entitled to the earned income relief, but not so, on the reading suggested by theour opinion, the section can only be read as enacting that for purposes of earned income relief, such income" will be included which, though it is the income of another person, has been earned by the assessee, or, in the case of a firm, where the assessee is a partner, by his being actively engaged as partner in the conduct of the business. The words "where the assessee is a partner" must be given effect to, even when the income of the minor or the wife is considered under the latter part, and they also point to the same conclusion. In reading the definition in this way, no violence is done to the language of it. The condition that the assessee must have worked actively as a partner is thus applicable also to the latter part of the definition. In our opinion, the High Court was right in the answer which it