TMI Blog1966 (10) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... ging to a partner or persons admitted to the benefits of the partnership and allowed to be used by the firm. The interest also appears to have been allowed by the firm simply because these funds belonged either to a partner or to the minors who had been admitted to the benefits of the partnership. It is thus clear that the interest at least indirectly arose and accrued to the wife and the minor sons because of their capacity mentioned in section 16(3)(a)(i) and (ii) in the Income-tax Act. Appeal dismissed. - - - - - Dated:- 4-10-1966 - Judge(s) : V. RAMASWAMY., J. C. SHAH., V. BHARGAVA JUDGMENT The judgment of the court was delivered by BHARGAVA J.----The appellant is a senior partner in a firm in which the two other partners are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions in each case. There was addition of further profit falling to their share and there was added interest on the opening balance of the accumulated profits in the accounts of each one of these three persons. All these amounts added to the accounts during the previous year in respect of share of profits as well as interest on accumulated profits were added to the income of the appellant for purposes of assessment under section 16(3)(a)(i) and (ii) of the Income-tax Act. These additions were challenged by the appellant on two different grounds. The first ground was that the provisions of section 16(3)(a)(i) and (ii) were ultra vires as being beyond the legislative powers of Parliament. The second ground was that, even on the application o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions only is includible in the assessment of the assessee under section 16(3)(a)(i) and (ii)?" The High Court answered both the questions against the appellant, and, consequently, he has come up to this court by special leave. So far as the first question is concerned, learned counsel appearing for the appellant himself did not press it before us in view of the decision of this court in Balaji v. Income-tax Officer, Special Investigation Circle, Akola. That point was earlier decided by the Madras High Court in B. N. Amina Umma v. Income-tax Officer, Kozhikode. It has been held by this court in Balaji's case that the provisions of section 16(3)(a)(i) and (ii) did not impose any unreasonable restriction on the fundamental rights of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on at all that, at that stage, either the wife or the minor sons, or anyone on their behalf, purported to enter into an arrangement with the firm to keep these accumulated profits as deposits. Similarly, there was no such contract which could convert those accumulations into loans advanced to the firm by these persons. The facts and circumstances indicate that the wife and the minor sons had earned these profits because of their membership of the firm or because of their admission to the benefits of the firm, and having earned these profits in that capacity, they allowed the use of their profits to the firm without any specific arrangement as would naturally have been entered into if these funds had belonged to a stranger. They let the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its made by them with the firm. Chouthmal Kejriwal v. Commissioner of Income-tax and Akula Venkatasubbaiah v. Commissioner of Income-tax were cases where interest was paid to the minors on the capital provided by them for the business of the partnership. In those cases, it was held that the interest on the capital contributed by the minor sons was benefit arising from the admission of the minors to the benefits of the partnership, and, consequently, that interest had to be included in the total income of the father in his assessment. These two cases are of no assistance, because the nature of the amount on which interest has accrued to the wife and the minor sons of the appellant is different and is not on capital advanced by them or on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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