9911796707
TMI Blog1982 (4) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... was invested on 14-4-1974 as capital, in two firms, viz., Vijayalakshmi Colour Co. ('Vijayalakshmi') and Singarappan Palayakat Co. ('Singarappan'). The ITO inferred that she earned the share income because of her capital and that the share income is therefore, includible in the assessee's hands under section 64(1)(vi) of the Income-tax Act, 1961 ('the Act'). He, accordingly, included the shares from these two concerns at Rs. 21,756 and Rs. 9,967 for the assessment year 1976-77 and Rs. 5,561 and Rs. 5,530 for the assessment year 1978-79. The assessee's case before the first appellate authority was that the share income did not arise because of the capital. At any rate, it was contended that the amounts gifted had been subsequently withdrawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in dispute that the capital amounts contributed to the two firms by the son's wife, Smt. Vijayalakshmi were out of gifts received from the assessee (individual). The amounts so given by the assessee was credited at Rs. 6,000 each in the two firms in her capital account in both cases. She had contributed no other capital. It is not the assessee's case that she was a working partner or had otherwise actively participated in the affairs of either firm. She was a housewife and her age was 23 at the time she entered the partnership. Both the partnership agreements are identically worded. In Vijayalakshmi her co-partner was one Singaram, son of Alalasundaram Chettiar, with equal share. In Singarappan she had 35 per cent interest while other part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,064.54 ----------------- C. F. 14,364.54 15,064.54 ------------------ 15,064.54 ------------------ 14-4-1975 14-4-1975 O. B. 14,364.54 Transfer of 12-4-1976 Profit 22,973.31 gift to Palaniappan Palayakat Co. 6,000.00 Drawings 700.00 C. F. 30,637.85 ------------------ ----------------- 37,337.85 37,337.85 ------------------ ----------------- 12-4-1977 13-4-1976 Drawings 9,764.00 O. B. 30,637.85 C. F. 32,970.56 Profit 12,096.71 ------------------ ----------------- 42,734.56 42,734.56 ------------------ ----------------- It was alternatively claimed from the above that in view of the transfer of Rs. 6,000 from the capital account on 14-4-1975, the inclusion for the assessment year 1978-79 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the citations on behalf of the assessee. In CIT v. Prem Bhai Parekh [1970] 77 ITR 27, the Supreme Court found that the incomes of minors admitted to the benefits of partnership were not agreeable in the hands of the father, as the capital in these cases was not the proximate cause of the income. A minor is not a party to the contract and it is not necessary, therefore, that consideration should emanate from him. In fact, the decision of the Supreme Court in CIT v. Jwalaprasad Agarwala [1967] 66 ITR 154 would support the proposition that even in the case of a minor admitted to benefits of partnership, the income may well be includible if the contribution of the capital is made a condition precedent for admission. In assessee's case, tho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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