9911796707
TMI Blog1990 (5) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee has filed application for condonation of delay. 2. The facts out of which the instant appeals arise are these. Master Rajesh Kumar, minor son of the assessee Shri Omprakash Singhal, was admitted to the benefits of partnership to the extent of 10 per cent of the profits in the firm M/s Agarwal & Co. The said firm was constituted by a deed of partnership dt. 21st Nov., 1980 having its accounting period ending on Diwali of 1981. Thus, the asst. yr. 1982-83 was the first year of assessment of the firm. Prior to the constitution of this firm, there was another firm in existence to which the minor was not admitted to the benefits thereof. There was a deposit of Rs. 1,000 on 12th July, 1976 in the earlier firm on which interest @ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revised returns of income made addition of share profit of minor in each of the three years, but did not include interest income of the minor. The ITO, however, included the interest income of the minor in the income of the assessee in all these years. The assessee was, however, successful in appeal before the AAC who deleted the additions relating to the interest income of the minor. Hence, these appeals by the Department. 3. The ITO charged interest under s. 217 which was unsuccessfully assailed in appeal before the AAC. The assessee took it as mistake apparent from record and, therefore, filed applications under s. 154 before the AAC for rectification. The said applications are said to be still pending before the AAC. The assessee, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invested by the partners would carry interest @ 18 per cent per annum. (iii) The deed of partnership though did not contain any condition as to investment of capital by the partners but nonetheless there was no contrary condition that no partner would make investment in the firm. (iv) An amount of Rs. 12,264 was transferred to the account of the minor from another concern of the assessee only a few days after constitution of the new firm evincing clear intention of investment and not the deposit. (v) It has been held by the Hon'ble Supreme Court in S. Srinivasan vs. CIT (1967) 63 ITR 273 (SC) that in absence of any agreement or arrangement with the firm to keep the accumulated profits as deposits, interest on the accumulated profits ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also his contention that the share of profit being credited to the same account of the deposits of the minor evinces that there was understanding between the partners and the guardian of the minor that the accumulated profits and interest were to be treated as deposits and not the investment. Further, it is argued by him that on payment of tax on the share income, it became capital of the minor and as such the scheme of s. 64 does not permit clubbing of income on the income which has already been taxed. 6. I have minutely considered the respective submissions of the parties. The principle that there cannot be any clubbing of income earned from the income already clubbed is not applicable in the case of minor admitted to the benefits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it and investment is of no consequence but the other circumstances pointed out by the learned Departmental Representative do assume importance for drawing an inference that it was an investment and not a loan. No doubt, the minor could have earned interest independently without burdening the income of his parents by allowing the deposits to remain with the earlier concerns but it is not known as to what weighed with the guardian of the minor and the other partners that those amounts were transferred to the accounts of the assessee-firm in proximity of time of admission of the minor to the benefits of the partnership in the firm. Moreover, there being no evidence of arrangement or agreement between the minor and the other partners that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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