• MERWIN RICHARD

Liability of person in respect of income included in the income of another person.

Updated: Oct 3

#IncomeTaxAct1961, #Section65, #liability, #income, #rules, #sections, #law


Chapter V (Sections 60 to 65) of the Income Tax Act 1961 deals with the provisions related to the Income of other persons included in the assessee’s total income. Section 65 of IT Act 1961-2020 provides for the Liability of a person in respect of income included in the income of another person.


The amended provision of section 65 is effective for the states financial year 2020-21 relevant to the assessment year 2021-22. In this article, you will learn detail of the provisions of section 65 of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations,


Section 65 states "Where, by reason of the provisions contained in this Chapter or in clause (i) of section-27, the income from any asset or from membership in a firm of a person other than the assessee is included in the total income of the assessee, the person in whose name such asset stands or who is a member of the firm shall, notwithstanding anything to the contrary contained in any other law for the time being in force, be liable, on the service of a notice of demand by the Income-tax Officer in this behalf, to pay that portion of the tax levied on the assessee which is attributable to the income so included, and the provisions of Chapter XVII-D shall, so far as may be, apply accordingly."

Provided that where any such asset is held jointly by more than one person, they shall be jointly and severally liable to pay the tax which is attributable to the income from the assets so included.


In the case of Commr. of Agrl. IT vs. Subbiah Gounder (1963) 47 ITR 522 (Mad) : TC 6R.176, it was rightly held that in a proceeding under s. 65 of the Act, there is no "assessment". We are in agreement with the view expressed in the case of Anandkumar that s. 65 provides for a concessional commutation of liability for tax based on the extent of holding of the assessee.

22. It was contended for the Revenue that while interpreting s. 65 of the Act, rules of interpretation governing the interpretation of exemption provisions should be applied. Reliance was placed on the decision of the Apex Court in the case of Novopan India Ltd. vs. Collector of Central Excise & Customs 1994 Suppl. (3) SCC 606, wherein the Court approved the principle governing the interpretation of exemption provisions set out by a Two Judges Bench of the Court in the case of Mangalore Chemicals & Fertilisers Ltd. vs. Dy. Commr. of Commrl. Taxes 1992.


In the case of R. Anandkumar & Ors. vs. State of Tamil Nadu (supra) is erroneous and was overruled the same. It was held that the absence of individual holding of land by a partner of a registered firm or of an unregistered firm treated as registered, does not disentitle such a partner from applying for the composition of agricultural income tax, under s. 65(3) of the Act.

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