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TMI Blog1996 (2) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee as deposits and whether the finding of the Tribunal that though the deposits were treated as capital, interest was payable in respect of any other loans or deposits from third party is not based on surmise or on no evidence or on improper view of the relevant facts and whether the decision based on such findings is not untenable in law ?" The assessee, Smt. Savitri Devi Dhandharia, along with four other persons formed a partnership firm and carried on business under the name and style of Dhandharia Tea Co. The partnership firm was formed by a deed of partnership dated January 1, 1970. The assessee's minor son, Bimal Kumar Dhandharia, was admitted to the benefits of partnership with the mutual consent of the parties. As per clause 10 of the said partnership deed, interest at the rate of six per cent. per annum was to be paid to each partner on the moneys for the time being standing to their respective credits. It was also agreed that by mutual consent the interest rate might be reduced, increased or waived. An amount of Rs. 1,200 was paid on behalf of the minor, Bimal Kumar Dhandharia. Thereafter some more deposits had been made. The amount was credited with interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be part of the benefit of partnership if there was an arrangement by which the interest was payable by. the firm on such accumulations. The Appellate Tribunal placed reliance on clause 10 of the partnership deed by which the interest was paid at the rate of six per cent. per annum on the moneys standing to the credit of the partners. On the other hand, it was submitted on behalf of the assessee that there was no stipulation that the money of the minor should be kept with the firm and hence the interest derived cannot be regarded as part of the benefits of the partnership. The Tribunal upheld the order of the Appellate Assistant Commissioner and dismissed the Revenue's appeals. The Revenue, therefore, requested the Tribunal to refer the questions to this court for opinion. The Tribunal, however, refused to refer the same to this court. Situated thus, the Revenue approached this court under section 256(2) of the Income-tax Act and this court accordingly directed the Tribunal to refer the questions for the opinion of this court. Therefore, the present questions referred to above have come to this court for opinion. We have heard both sides. Mr. G. K. Joshi, learned standing cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontribution. It is an admitted fact that a deed of partnership was made amongst the partners. Partner No. 3 is the assessee and the mother of the minor who was admitted to the benefits of the partnership. It is also admitted by learned counsel for the parties that the father of the minor is still alive. But he was not a partner to the firm. Therefore, the assessee was not the natural guardian of the minor at that point of time. As per clause 7 of the partnership deed, the partners decided that all the assets should form the capital of the said firm contributed by the parties including the minor admitted to the benefits of the partnership to the extent of the balances standing to their respective credits in the books of account of the said partnership firm and also as per clause 10 interest at the rate of six per cent. per annum should be paid to each partner on the moneys for the time being standing to their respective credits. The parties thereto might with mutual consent reduce, increase or waive the interest payable by the firm. It is also an admitted fact that the amount of Rs. 1,200 was contributed by a cheque received from B. T. Co. (P.) Ltd. However, it is not known who ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he court as the case may be who alone can give consent for such conversion. From the record we do not find anything to show that there was such agreement to convert the said deposit into capital. In the absence of any such agreement, we are unable to accept the contention of Mr. Joshi that interest was paid on the capital. Mr. Joshi has drawn our attention to a decision of the apex court in the case of S. Srinivasan v. CIT [1967] 63 ITR 273. In the said case, the apex court had the occasion to deal with a similar matter. In that case the appellant was the senior partner in a firm in which his wife and a stranger were partners and his two minor sons were admitted to the benefits of the partnership. One of the clauses of the deed of partnership provided that "if the firm requires any sum for meeting the expenses for its management and if any of the partners has and is willing to give such amount, he may advance (such amount) as loan. He may receive interest for such sum at the rate of 12 annas per cent. per mensem". For a number of years up to the previous year relevant to the assessment year 1957-58, the shares of profit of the wife and the minor sons were allowed to accumulate with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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