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Issues Involved:
1. Whether the Tribunal was justified in sustaining the application of the provisions of section 16(3)(a)(iv) of the Indian Income-tax Act. 2. Whether the interest income of the minor children of the assessee should be added to the assessee's assessable income. Detailed Analysis: Issue 1: Application of Section 16(3)(a)(iv) of the Indian Income-tax Act The primary issue was whether the Tribunal was justified in applying section 16(3)(a)(iv) of the Indian Income-tax Act to add the interest income of the minor children to the assessee's assessable income. The relevant provision states that in computing the total income of any individual for the purpose of assessment, there shall be included the income of a minor child arising from assets transferred directly or indirectly to the minor child by such individual otherwise than for adequate consideration. To determine if this provision applied, it was necessary to establish whether there was a transfer of assets from the assessee to his minor children. The assessee argued that there was no transfer of assets because the amounts credited to his children's accounts were the result of a partition of joint family assets, not a transfer. The court examined whether the business assets, initially the assessee's separate property, had acquired the character of joint family property through the partition deed dated December 8, 1955, and subsequent entries in the account books. The court found that the partition deed explicitly declared the business assets as the assessee's separate and self-acquired property. There was no indication in the deed that the business assets were to be treated as joint family property. Moreover, the court noted that the mere act of dividing separate property among family members does not automatically convert it into joint family property. Issue 2: Interest Income of Minor Children The court had to decide if the interest income from assets credited to the minor children's accounts should be included in the assessee's assessable income. The sums allotted to the wife and children were invested in shares, and the interest earned from these investments was added to the assessee's income by the Income-tax Officer. The assessee contended that this should not be the case as the amounts were the result of a partition, not a transfer. The court examined the nature of the partition and the rights of the parties involved. It was found that the partition deed and the subsequent credit entries did not transform the business assets into joint family property. Instead, the court concluded that the amounts credited to the minor children were indeed transfers of assets as per section 16(3)(a)(iv). The court also discussed the rights of the wife and daughters in a partition under Hindu law. It was noted that, according to the Mitakshara law as interpreted in Southern India, wives and daughters do not have a right to a share in a partition unless specific conditions are met. In this case, the amounts credited to the wife and daughters were not part of a legitimate partition but were gifts, thus constituting a transfer of assets. Conclusion: The court concluded that the amounts credited to the minor children's accounts were indeed transfers of assets and not the result of a partition of joint family property. Therefore, the interest income from these assets should be included in the assessee's assessable income under section 16(3)(a)(iv) of the Indian Income-tax Act. The question was answered against the assessee, who was also ordered to pay the costs of the department, with counsel's fee set at Rs. 250.
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