The Income Tax Appellate Tribunal (ITAT), Mumbai Bench has observed that guardians are liable to discharge the tax obligations of minors in the absence of the minor’s parents.
The bench of Mahavir Singh (Judicial Member) and N.K. Pradhan (Accountant Member) has observed that the provisions of Section 160(1)(ii) of the Income Tax Act constitute the guardian or manager of the minor as a representative assessee if such guardian or manager is entitled to receive or is in receipt of any income on behalf of such minor, and the representative character of such guardian extends only in respect of such income which he is entitled to receive or is in receipt of.
The appellant/assessee had filed a return of income for the assessment year, declaring the income. The return of income is filed by the legal guardian of minor Farzan Fouzdar for the reason that the assessee is a minor and received income on behalf of his parents, namely Kersey E. Fouzdar and Ketayan K. Fouzdar, who died during the Tsunami tragedy in Sri Lanka on December 16, 2004.
The Bombay High Court had appointed Mr. Percy Fouzdar as the legal guardian of minors Farzan Fouzdar and Anosh Fouzdar. The legal guardian had appointed Mr. Dehran M. Wadia as C.A. on behalf of the minor.
As per the assessment order, the total income of the assessee was determined at Rs. 14,58,900 after discussion with the representative of the assessee. Thus, it is clear that no addition is made by the AO.
However, in an appeal before CIT (A), the assessee challenged the taxation of income disclosed in the computation of income enclosed with the return of income filed by the assessee for the reason that there is no valid charge on the income of the minor because both the minor’s parents have died and law requires clubbing of the minor’s income with that of the parents.
The CIT (A) held that as per Section 159, the Bombay High Court, by virtue of its order, has appointed legal representatives of the deceased parents of the minors as well as the minors, confirming the action of the AO in treating the income as chargeable to tax. Similar are the orders passed by CIT (A) as well as by AO in other minors and other assessment years.
The tribunal held that tax can be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him. A representative assessee may not, in such capacity and with respect to income received by him as a representative assessee, be assessed under any provision of the Act other than Chapter XV as mandated in Section 161(2). If, however, such a representative assessee has his own individual income, he is to be separately assessed in his individual assessment.
Case Title: Master Farzan Fouzdar Master Anosh Fouzdar Versus ITO
Case No.: ITA No.2689/Mum/2011