1984 (1) TMI 141 - AT - Income Tax

Summary

Issues:
1. Inclusion of income from house property of two minor sons in the assessee's income.
2. Repayment of loans by minor sons and applicability of s. 27(1) of the IT Act.
3. Deduction on account of interest.

Analysis:

1. The appeal challenged the inclusion of 1/4 share each of two minor sons of the assessee from a house property in the assessee's income. The ITO had included the share income in the assessee's income for the relevant assessment year based on the loans raised for the minors from a firm where the assessee was a partner. The AAC upheld this inclusion, citing lack of evidence establishing a genuine creditor-debtor relationship. However, subsequent to the minors attaining majority, their income was separately assessed. For the assessment year in question, the ITO invoked s. 27(1) of the IT Act to include the share income of the sons in the assessee's income, which the AAC upheld.

2. The assessee contended that the minor sons had repaid the loans from their own savings, supported by evidence of their accounts in different firms. The assessee argued that raising loans for minors was permissible under the Hindu Minority & Guardianship Act, and the loans were not disadvantageous to the minors. The assessee also highlighted that the ITO had accepted separate assessments for the sons from previous years and that the ITO's stance was contradictory between income-tax and wealth-tax assessments. The Tribunal observed that the sons had indeed repaid the loans from their own funds, and the provision of s. 27(1) was not applicable once the sons had become major. The Tribunal found no perversity in the previous assessments and concluded that the inclusion of the sons' income in the assessee's income was not justified.

3. The third ground raised was regarding the deduction on account of interest, which became irrelevant after the Tribunal deleted the additions related to the inclusion of the sons' income. Consequently, this ground was rejected as infructuous.

In conclusion, the Tribunal partly allowed the appeal, ruling in favor of the assessee by deleting the additions made on account of including the income of the two sons in the assessee's income.