9911796707
TMI Blog1968 (3) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... a minor son, Suresh Chandra, constituted a Hindu undivided family till or about 11th September, 1955. The undivided family was carrying on business of forest contracts. On or about 11th September, 1955, there was a partial partition of the family as regards the business of forest contracts. In this partition, the business capital of the Hindu undivided family was divided between the father and his sons. On 12th September 1955, a partnership consisting of Badrilal and his three major sons for carrying on the business of forest contracts was brought into existence by a partnership deed. The minor son, Suresh Chandra, was admitted to the benefits of the partnership. The amount that came to the share of the father and his sons in the division of the business capital was credited in the account books of the firm to the father and his sons respectively. The firm was granted registration under section 29A of the Act for the assessment year 1956-57. The registration was renewed for subsequent years. The Income-tax Officer included in the total income of the assessee. Badrilal, for the assessment year 1956-57 the share income from the partnership arising to the minor, Suresh Chandra, as al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefits of partnership in a firm of which such individual is a partner; ........" This provision is clear enough. It says that in the total income of an individual the income of a minor child a sing directly or indirectly " from the admission of the minor to the benefit of partnership " in a firm of which the assessee is a partner shall be included in the total income of the assessee for the purpose of assessment. If the income arising to the minor child has direct or indirect connection with the fact of its admission to the benefits of the partnership, then the minor's income has to be included in the total income of the individual. If on the other hand, the income derived by the minor child is quite independent of the facts of its admission to the benefits of a partnership, then that income of the minor child cannot be included in the total income of the individual. For the inclusion of the minor child's income in the total income of an individual under section 16(3)(a)(ii), there must be a direct or indirect connection between the minor's admission to the benefits of partnership and the receipt of the income. It follows, therefore, that if the minor child gets interest on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cult to say that the interest on the advances made or the capital contributed voluntarily is income arising directly or indirectly from his admission to the benefits of the partnership. " It is thus manifest that the Tribunal, though it held that the amount standing to the credit, in capital account of minor, Suresh Chandra, in the books of account of the partnership firm was capital amount, reached the conclusion that the interest paid on that amount could not be regarded as income which arose directly or indirectly to the minor, Suresh Chandra, from his admission to the benefits of partnership in the firm as there was no obligation on him or any partner to reeta in any moneys in the shape of capital in the firm. We are unable to accept this reasoning. In our opinion, if the minor child did contribute any capital to the partnership firm, and if on that capital he earned interest, then that income would be one falling under section 16(3)(a)(ii) of the Act, no matter whether the minor or any partner was or was not under any obligation to contribute any capital. An amount in fact contributed by a partner as capital does not become an advance merely because under the partnership deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmission. Any income that could have been derived by him without his being admitted to the benefits of the partnership cannot be said to have been derived by him from the admission. Once some connection between the receipt of income and the admission is established, the provision applies, whether the connection is direct or indirect." The Allahabad High Court also pointed out that interest paid on a loan ;advanced to the partnership by the minor is connected with the fact of his admission to the benefits of partnership, if the partnership deed forbids raising of a loan from any person other than a partner or a person admitted to its benefits ; it is not connected with the fact if interest is paid on a deposit made, or a loan advanced by the minors ; and the partnership was free to accept a deposit or a loan from any person even if not connected with it. The case before us is analogous to the case of Chouthmal Kejriwal v. Commissioner of Income-tax , where the Assam High Court has held that, where a minor has been admitted to the benefits of partnership in a firm in which his father is a partner, and the minor has supplied capital, any income accruing to the minor as interest on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission to the benefits of partnership and, consequently, any interest accruing on the capital will arise directly or indirectly from the admission of the minor to the benefits of partnership. The Bombay case is inapplicable here as in the present case the interest amount, which arose to the minor Suresh Chandra, was not the result of any deposit made by with the firm. To the same effect are the decisions in Akula Venkatasubbaiah v. Commissioner of Income-tax and Commissioner of Income-tax v. Bilas Raj Tekriwal . In those cases it was held that interest on the capital contributed by the minors was an indirect result of his being admitted to the benefits of partnership and consequently the interest amount had to be included in the total income of the father in his assessment. It may be noted that in Bilas Raj Tekriwal's case also the Tribunal had found that there was no compulsion on the minor sons to either contribute or maintain any capital to and with the firm. The decision of the Supreme Court in S. Srinivasan v. Commissioner of Income-tax shows that interest earned by the minor, Suresh Chandra, on the accumulated profits is assessable in Badrilal's hands. That was a case in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
