Why Indian Penal code Exempts Children below the of 7?

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This story appears in Sambava Parva / Adi Parva of the great epic, Mahabharata.

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Sage Mandavya was sitting in deep meditation at the entrance of his hermitage at the foot of a tree in the forest, with his arms upraised. He had been in this state for years together. But tumultuous things started happening around him of which he was totally oblivious of. A few robbers with their loot had strayed in that direction on being pursued by the king’s soldiers. The robbers found the ascetic’s hermitage and took refuge there. The soldiers tracked down the robbers to the hermitage and questioned the sage about them. But the rishi was still in his trance and hence gave no response. But they eventually caught the robbers concealed in his hut. Under those circumstances, they mistook the rishi as an accomplice of the thieves (thieves masquerading as sages and godmen was prevalent even during the days of Mahabharata, perhaps!)

The thieves along with the rishi were taken and arraigned before the king who sentenced all of them to be executed by impaling. Punishing the convicts by impaling with a stake was prevalent in those days in Bharathavarsha, similar to crucifixion in Roman Empire.

The virtuous sage, though impaled on the stake, did not die. Since he was in yoga when he was impaled he remained alive by the power of yoga. Besides, he had summoned a few other rishis also to the scene, who were aghast at the development. The king got to know of the miraculous survival of the sage and came to him and rushing to Mandavya, the king begged forgiveness for his grave error in his dispensation of justice. Mandavya generously forgave him without the customary curse, as is the wont of the rishis in general!

The king then tried to get the stake out of the torso of the sage but in vain since it got entrenched in his body. so as a compromise the part of the stake that was protruding from the body was sawed off. Thus the sage Mandavya had a stake sticking out of his back from then on. Hence he came to be known in all the three worlds by the name of “Ani-Mandavya” (Mandavya with the stake within). Some chronicles say that he used to hang his flower basket on that “ani”!

The sage went on with his penance and ultimately went to the abode of the god of justice (dharma). He confronted the dharmaraj with the question as to why such a severe punishment was meted out to him for no fault of his, in spite of his high level asceticism. His pointed query was what sin he had committed to deserve such a grave torture with a stake. The god of justice replied that a little insect was once pierced by Mandavya with a blade of grass when he was a child. He also appraised him of the rule that a sinful act multiplieth in respect of the woe it bringeth in its train.

On hearing this, Mandavya replied with indignation that the scriptures shall not recognise any wrongful act committed by a child up to the TWELFTH YEAR of his age from birth as sinful. And hence the god of justice had erred terribly. The punishment thou hast inflicted on me for such a venial offence hath been disproportionate in severity and unjustified as well.
He then cursed the dharmaraj to be born on earth in a lower social order (Dharma Devata came to be born as Vidura later on account of this curse, as the story goes). Th sage also established a dictum that an act shall not be sinful when committed by one below the AGE OF FOURTEEN. But when committed by one above that age, it shall be regarded as sin.