COMMISSIONER OF INCOME-TAX VS A. VAIRAPRAKASAM, 2000 PTD-MADRAS-HIGH-COURT-INDIA 3635 (1998)

(a) Income-tax---

----Total income---Inclusions in total income---Inclusion of income of spouse or minor child---Effect of Explanation to S.64---General rule that income of spouse or minor child should be included in total income of that spouse or parent whose income is greater---Change in individual in whose total income inclusion is made---Meaning of "necessary"---Term "necessary" implies compelling circumstances apart from benefit to Revenue---Indian Income Tax Act, 1961, S.64.

Section 64 of the Income Tax Act, 1961, deals with the circumstances in which the income of the spouse or minor child is to be included in the income of the individual assessee who is the other spouse or the parent of the minor. Explanation 1 provides that the general rule is that the income of that spouse or the minor child should be included in the! income of that spouse or parent whose income is greater. This is followed by a mandate that where the income is so included in that of. one of the spouses or one of the parents of the minor "any such income arising in any succeeding year shall not be included in the total income of the other spouse or parent". This is followed by the Explanation that if the Income-tax Officer is satisfied after giving that spouse or parent an opportunity of being heard, and forms the opinion that "it is necessary to do so", he may include the income of the concerned spouse or minor in the income of the other spouse or parent. The scheme of the Explanation would indicate that the, general rule is that the spouse or the parent who has the greater income is the one in whose assessment the income of the other spouse or the minor should be included, and once so included, it shall continue to be included in the income of that spouse or parent in succeeding years until and unless the Income-tax Officer, after giving opportunity to the affected parties, forms the opinion that it is necessary to include it in the income of the other spouse or parent. There is no room for any ambiguity in the provision. The mandate of the Legislature is that once included in the income of either spouse or parent, it "shall" continue to be included in the assessment of that spouse or parent, only. That situation can be altered only when the Income-tax Officer, after giving the affected parties appropriate holds it is "necessary" to do so. The various shades of the meaning of the word easy" would indicate that a thing can be regarded as necessary only when there is an element in the situation which compels a particular thing to be registered as being essential or unavoidable.

This mandate of the Legislature has been given notwithstanding the recognition by the Legislature that it is in the interest of the Revenue to include the minor's income in the income of that parent whose income- is higher than the included of the other parent. Nothing would have been easier than to lay down that the minor's income shall always be included in the income of that parent whose income is higher. That, however, is not the scheme of the Explanation. Before the change can be regarded as "necessary" there should be some compelling circumstances apart from the benefit to the Revenue arising from the inclusion in the income of the assessee spouse or parent whose income is higher in the assessment year:

Held, that the view taken by the Tribunal was that the mere fact that in a particular assessment year the income of the other parent was higher than that of the parent in whose assessment the income of the minor had been included in the earlier assessment year, could not be regarded as an event which would inevitably lead to the conclusion that it was necessary to change the mode of assessment of the income of the parent in which the minor's income had been included in the earlier years, and include the minor's income in the income of the other parent in the assessment years 1977-78 and 1978-79. This view was correct.

(b) Words and Phrases---

----"Necessary"---Meaning.

C.V. Rajan for the Commissioner,

P.P.S. Janarthana Raja for the Assessee.

JUDGMENT

R. JAYASIMHA BABU, J.---The substance of the question referred to us at the instance of the Revenue revolves round the meaning of the word "necessary" found in Explanation 1 to section 64 of the Income Tax Act, 1961---Whether it is to be construed liberally as contended by the Revenue or narrowly.

Explanation 1 to section 64 of the Act reads as under:

"For the purposes of clause (i), the individual in computing whose total income the income referred to in that clause, is to be included, shall be the husband or wife whose total income (excluding the income referred to in that clause) is greater; and, for the purposes of clause (iii), the income of the minor child from the partnership shall be included in the income of that parent whose total income (excluding the income referred to in that clause; is greater; and where any such income is once included in the total income of either spouse or parent, any such income arising in any succeeding year shall not be included in the total income of the other spouse or parent unless the Income-tax Officer is satisfied, after giving that spouse or parent an opportunity of being heard, that it is necessary so to do."

Section 64 of the 'Act deals with the circumstances in which the income of the spouse or minor child is to be included in the income of the individual assessee who is the other spouse or the parent of the minor. Explanation 1 provides that the general rule is that the income of the spouse or the minor child should be included in the income of that spouse or parent whose income is greater. This is followed by 'a mandate that where the income is so included in that of one of the spouses or one of the parents of the minor" any such income arising in any succeeding year shall not be included in the total income of the other spouse or parent." This is followed by the Explanation that if the Income-tax Officer is satisfied after giving that spouse or parent an opportunity of being heard, and forms the opinion that "it is necessary to do so", he may include the income of the concerned spouse or minor in the income of the other spouse or parent.

The scheme of the Explanation would indicate that the general rule is that the spouse or the parent who has the greater income is the one in whose assessment the income of other spouse or the minor should be included, and once so included, it shall continue to be included in the income of that spouse or parent in succeeding years until and unless the Income-tax Officer after giving due opportunity to the affected parties, forms the opinion that it is necessary to include it in the income of the other spouse or parent.

It is significant that the terminology used in this Explanation is very emphatic. There is no room for any ambiguity in the provision. The mandate of the Legislature is that once included in the income of either spouse or parents, it "shall" continue to be included in the assessment of that spouse or parent only. That situation can be altered only when the Income-tax Officer, after giving the affected parties appropriate opportunity holds that it is "necessary to do so.

The dictionary meaning of the word "necessary" is something indispensable to some purpose. The word is defined in Webster's Dictionary as unavoidable, inevitable, indispensable, mandatory, inherent in the situation, and undeniable.

The various shades of the meaning of the word "necessary" would indicate that a thing can be regarded as necessary only when there is an element in the situation which compels a particular thing to be regarded as being essential or unavoidable.

The view taken by the Tribunal in this case is that the mere fact that in a particular assessment year, the income of the other parent was higher than that of the partner in whose assessment, the income of the minor had been included in the earlier assessment year, could not be regarded as an event which would inevitably lead to the conclusion that it was necessary to change the mode of assessment of the income of the parent within which the minor's income had been included in the earlier years, and include the minor's income in the income of the other parent in the assessment year in issue. We do not find any error in that view of the Tribunal. The legislative intention as expressed in Explanation 1 to section 64 of the Act is that once included in the income of a parent,, it is that parent's assessment alone which would continue to include the income of the minor. This mandate of the Legislature has been given notwithstanding the recognition by the Legislature that it is in the interest of the Revenue to include the minor's income in the income of that parent whose income is higher than the income of the other parent. Nothing would have been easier than to lay down that the minor's income shall always be included in the income of that parent whose income is higher. That, however, is not the scheme of the Explanation. The Income ?tax Officer by choosing to label his action as being "necessary cannot defeat the legislative intent and arrogate to himself powers which have not been conferred on him by the legislative provision. Before the change can be regarded as "necessary" there should be some compelling circumstance apart from the benefit to the Revenue arising from the inclusion in the income of the assessee spouse or parent whose income is higher in the assessment year.

The question referred to us at the instance of the Revenue which arises out of the assessment of one of the parents of the minor for the assessment years 1977-78 and 1978-79 as to whether the Tribunal was correct in law in holding that once the share income of the minor child is included in the total income of either of the parent for one assessment year it should continue to be added in the total income of the said parent in subsequent years as well, notwithstanding the Explanation to section 64 of the Income-tax Act, in the circumstances of the case, is in the affirmative, against the Revenue and in favour of the assessee.

The assessee shall be entitled to costs in the sum of Rs.1,500 (Rupees one thousand and five hundred only).

M.B.A./134/FC ????????????????????????????????????????????????????????????????????????????????? Order accordingly.