TMI Blog1996 (3) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... er can lend money to his minor child, both as a contracting party for the loan and accepting party as the guardian -- a dual capacity. It arises under the following circumstances. The assessee, Shri K. R. Kumaran, on April 26, 1981, purchased a property in three names--his wife showing consideration of Rs. 30,000, his two minor sons showing consideration of Rs. 40,000 each. There is no dispute that the entire amount is the assessee's own money. It is his case that he gave a loan to each of his minor sons to purchase the property in their names. The Gift-tax Officer, Palghat, dealing with the situation of assessment for the year 1982-83 considered the situation. He observed that the transaction of a loan implies an agreement to repay t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in two capacities and that the loan made to each of the minor children would have to be considered as quite valid in law. Reliance was placed on a Tribunal decision of the Bangalore Bench holding against the Revenue finding any difficulty in regard thereto. The Tribunal observed that where the assessee had advanced money to his minor children then it would not be a case of gift at all, placed reliance on the decision of the Bangalore Bench of the Tribunal in the case of First ITO v. Mangalore Ganesh Beedi Works [1986] 50 CTR (Trib) 45 (Bang). The Tribunal observed that a father could lend money to, his minor child and that the transaction made by the father in his dual capacity is valid in law. It is observed that the question as regards th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expressly declared to be void. An agreement enforceable at law as a contract, for the purpose in question, requires persons competent to contract. There is no doubt that a person by reason of infancy is incompetent to contract and thus cannot make a contract within the meaning of the Act. The situation is beyond doubt that an infant falls within the class of persons understood as incapable of entering into a contract and, therefore, would not be liable as to consequences thereof even for necessaries and demands in regard thereto could not be contemplated for enforcement against them. The factual situation before us presents a situation of an anomalous character. It is the father who has acted at both the points of the transaction under co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual -- the father -- in his individual capacity as advancing the loan amount and in his legal capacity as the guardian of the minor sons at the other end. In the process of proceeding further in the analysis, the question is whether there can be a transaction by a person virtually with himself. With advantage this jurisprudential aspect is relied upon by the Delhi High Court in CIT v. Mridu Hari Dalmia [1982] 133 ITR 550 leading to the conclusion that two or more capacities of a person would not enable and empower him to enter into a legal transaction almost with himself at both the ends. It would be of benefit to quote the same paragraph which is as follows : " In this context the following passage from Salmond's Jurisprudence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statutory provision of section 10 of the Contract Act as succinctly elucidated by the age old judgment of the Privy Council in Mohori Bibee v. Dharmodas Ghose [1903] ILR 30 Cal 539 ; [1903] 30 IA 114 as well as the jurisprudential position preventing any person to act simultaneously in a dual capacity at both the ends of contract for advancement of money, the transaction would not be valid in law. For the above reasons, we answer the question in the negative, i.e., in favour of the Revenue and against the assessee. A copy of the judgment under the seal of this court and the signature of the Registrar shall be sent to the Income-tax Appellate Tribunal, Cochin Bench, for passing consequential orders. - - TaxTMI - TMITax - Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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