TMI Blog1981 (10) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows: Rs. 17-1-1969 37,000 7-5-1969 13,000 9-6-1969 15,000 27-10-1969 1,000 ---------------- Total 66,000 ---------------- A sum of Rs. 26,000 had been shown as returned by the minor son on September 3, 1969, leaving a balance of Rs. 40,000, as remaining due from the minor son to the father as on March 31, 1970. These cheques were immediately deposited in an account in the name of the minor son with the Dena Bank Ltd. Cheques in favour of ICC were made out on this bank account as below: Rs. 17-1-1969 30,000 7-5-1969 14,000 9-6-1969 21,000 1-7-1969 5,000 27-10-1969 3,000 The following amounts had been received back from the ICC : Rs. 6,000 on 22-8-1969 26,000 on 3-9-1969. It will be seen that the deposit of Rs. 30,000 with the ICC had been made out of the sum of Rs. 37,000 given by the assessee; the deposit of Rs. 14,000 on May 7, 1969, included the sum of Rs. 13,000 given by the assessee; the sum of Rs. 21,000 had been deposited on June 9, 1969, out of Rs. 15,000 given by the assessee and other amounts received by the minor by way of dividends; and Rs. 3,000 had been deposited on October 27, 1969, utilising the sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee preferred an appeal to the AAC. But the appeal was not successful. The AAC was of the view that since a minor cannot be a party to a contract of loan, the ITO's conclusion that the entire transaction was in the nature of a collusive arrangement was well borne out by the facts. The act of advancing an amount free of interest to the minor and the act of depositing the same amount in a company in which the assessee was director were interconnected and inter-related acts which formed part of the same transaction. The essence of the whole transaction was that moneys belonging to the assessee had been deposited with a company of which the assessee was a director in the name of his minor son, the minor son's name being put in merely to show that the deposit belonged to him whereas in fact it did not. The assessee preferred a further appeal to the Income-tax Appellate Tribunal (ITAT) and this time he was successful. The ITAT repelled the contentions of the departmental representative that the assessee's version of a loan to the minor son could not be accepted because the assessee could not possibly contract with himself, that in any case even the loan was " transfer " within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enami in the name of his minor son. He characterised the alleged version of a loan having been advanced to the son as totally incredible and unacceptable. According to him all the relevant entries in the books and the balance-sheet were sham and collusive and had to be ignored. We are, however, unable to entertain this contention. As pointed out by Sri Harihar Lal, the learned counsel for the assessee, the Tribunal has found the transaction to be genuine and characterised it as a legitimate attempt at tax avoidance. This finding of fact by the Tribunal has not been challenged by the department by seeking a reference of an appropriate question of law as to the sustainability of such a finding. Moreover, the fact of the advance having been given by the assessee to his minor son has been sought to be supported by entries in the accounts of the minor appearing in the assessee's books. There is also on record a balance-sheet of the various transactions of the minor son. These documents show that the minor son had not only these items of transactions but also several others. He had also his own sources of income. The resources of the minor could legitimately be operated upon by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any part of the income or assets; (b) 'transfer' includes any settlement, trust, covenant, agreement or arrangement. 64. Income of individual to include income of spouse, minor child, etc.(1) In computing the total income of any individual, there shall be included all such income as arises directly or indirectly . ......" (v), subject to the provisions of clause (i) of section 27, in a case not falling under sub-clause (iii) of this sub-section, to a minor child (not being a married daughter) of such individual, from assets transferred directly or indirectly to the minor child by such individual otherwise than for adequate consideration ; ...... .." Arguments have been addressed before us on behalf of the revenue attempting to bring the present case-and, therefore, every case of loan under each one of the provisions contained in ss. 60 and 61 particularly by taking advantage of the enlarged definitions of "transfer " contained in s. 63(b) and of " revocability " contained in s. 63(a). These are arguments with far reaching consequences and we do not find it necessary to express any opinion on these contentions as the present case can be disposed of on a short ground. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a loan is a contract; In our opinion, in the present case, there can be no loan because there can be no contract between two parties in question. If the transaction is viewed as a loan of money by the assessee to his minor son that is clearly unenforceable. It is settled law that a contract by a minor is void. There can, therefore, be no lawful agreement between the assessee and the minor son whereby the latter can be bound to repay the amount which he has borrowed from the father. The transaction, therefore, cannot be viewed as a loan between the father and the minor son. Nor can the transaction be viewed as one of loan by the father in his individual capacity to himself acting as the guardian of the minor son. It is quite true, as Shri Harihar Lal points out, that the law recognises different capacities in which an individual can function. An individual may act in certain matters in his own individual capacity. He may act as an agent or a trustee or a guardian or a partner or a shareholder or a director and so on. But, the concept of " capacity " cannot be equated to a concept of " legal personality ". A contract of loan requires two persons. There cannot be a loan by the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the minor after the minor has become a major on several equitable grounds. The minor may then have to choose between accepting the transaction and returning the amount or forgoing the amount of interest which he has earned and benefited from in the course of the years. In law there may be various types of recourse available to creditor in order to recover monies which might have been utilised for the benefit of a minor or which might have become part of his assets. There may be several grounds on which such action could be founded but a contract is not one of them. It is not possible for the father either to sue himself for the recovery of the amount during the minority of the minor or to sue the minor for, the recovery of the amount on the basis of a contract. The transaction in law cannot be described as a transaction of loan. It appears to us that once the case put forward by the assessee and his attempt to have this transaction considered as a transaction of loan is rejected, the assessee can have no basis on which to resist the inclusion of the interest income in his assessment. There is a clear transfer of monies by the assessee to the minor son. This transfer and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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