1967 (3) TMI 12 - SC - Income Tax

Share income - there was no contribution of any sum in Firms by the minor son out of the gift money from the father - no evidence on record to justify a finding that the minor had been admitted as a partner in the firm - share income from those Firms was not liable to included in the assessment under s. 16(3)(iv) - Revenue s appeal dismissed

Summary

Issues:
1. Inclusion of minor son's share income in father's assessment under section 16(3)(a)(iv).
2. Treatment of share income from specific firms in father's assessment.

Analysis:
1. The case involved two questions referred to the High Court under section 66(2) of the Indian Income-tax Act, 1922, regarding the inclusion of the minor son's share income in the father's assessment under section 16(3)(a)(iv). The minor son had been admitted to the benefits of partnership in three firms, and his share income was invested in one of the firms. The Income-tax Officer included this income in the father's assessment for the relevant year.

2. The Appellate Assistant Commissioner rejected the contention that only the interest on the original gift money should be included in the assessment, stating that the share of profits and interest accrued to the son due to the capital received as gifts from the father should be considered an asset indirectly transferred by the father to the son. The Appellate Tribunal also upheld the inclusion of the minor's share income from the three firms in the father's assessment under section 16(3)(a)(iv) based on the financial connection between the firms and the introduction of the original capital by the father.

3. The High Court, on a reference, ruled in favor of the assessee, stating that the minor's share income from certain firms should not be included in the father's assessment under section 16(3)(a)(iv). The High Court found that the reasons given by the Tribunal for including the income from these firms were not sufficient to establish a direct or indirect connection between the assets transferred by the father and the minor's share of profits.

4. The High Court held that the Tribunal's reliance on past records and the admission of the minor to the partnership in the Dhubri firm was not conclusive evidence of the minor's share of profits arising from the assets transferred by the father. The High Court emphasized the lack of evidence to support the claim that the minor was admitted to the partnership solely due to the introduction of capital by the father.

5. The High Court dismissed the argument that the share of profit indirectly arose from the gift, stating that all aspects of the case had been considered. The appeal was ultimately dismissed, upholding the High Court's decision in favor of the assessee and rejecting the Commissioner of Income-tax's appeal.

6. In conclusion, the judgment clarified the application of section 16(3)(a)(iv) in assessing the minor son's share income in the father's assessment and emphasized the need for a direct connection between the assets transferred by the father and the minor's share of profits for inclusion in the assessment.