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Issues:
1. Inclusion of interest received by minor daughters in the assessment of the assessee. 2. Interpretation of partnership deed clause regarding withdrawal limits for minors. 3. Application of section 64(1)(iii) of the Income Tax Act, 1961. 4. Consideration of interest on capital and loans received by minors in partnership. Analysis: 1. The appeal pertains to the assessment year 1978-79 where the Income Tax Officer (ITO) included interest received by four minor daughters of the assessee, who were admitted to the benefits of a partnership firm. The ITO argued for inclusion based on the proximity of admission to partnership benefits and income derived. The interest amounts received by each minor were specified. 2. The Appellate Assistant Commissioner (AAC) referred to a partnership deed clause limiting monthly withdrawals to Rs. 500 for each partner, including minors. The AAC concluded that the minors' inability to withdraw accumulated profits indicated a proximity between admission to partnership benefits and interest receipt, applying section 64(1)(iii) of the IT Act, and dismissed the appeal. 3. The assessee contended that the partnership deed clause did not restrict profit withdrawals and cited relevant court decisions. The Departmental Representative relied on legal commentary supporting aggregation under section 64(1)(iii) due to minors' capital contribution. The tribunal found a direct nexus between interest on capital and minors' admission to partnership benefits, leading to aggregation of interest amounts totaling Rs. 3,600. 4. The tribunal disagreed with the AAC, stating that the partnership deed did not prohibit profit withdrawals by minors. Interest on current and loan accounts did not have a direct or indirect nexus with admission to partnership benefits. Citing Bombay High Court decisions, the tribunal held that interest amounts in the accounts need not be included under section 64(1)(iii). Additionally, the tribunal rejected the contention that interest paid by the firm should be considered income of the firm. 5. Ultimately, the tribunal partially allowed the appeal, concluding that interest on capital should be aggregated but interest on current and loan accounts need not be included under section 64(1)(iii) of the IT Act, 1961. The judgment clarified the distinction between interest received on capital and loans by minors in a partnership.
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