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TMI Blog2007 (5) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... alid ? 2. Whether, on the facts and in the circumstances of the case, interest on capital and accumulated profits, paid to minors is covered under section 64(a) (iii) and 64(1) (iii) in the proceedings in response to notice under section 148 of the Income-tax Act, 1961 ?" 2 Apparently, the second question contains a clerical mistake and the words "section 64(a)(iii)" need to be omitted. 3 Smt. Nisha Rani Agrawal (hereinafter called the assessee) is the assessee in her individual capacity. She had two sons who, during the relevant period, were minors. Their names are Rohit and Rajiv. 4 Rohit was admitted to the benefits of partnership in the following firms to the extent of a share indicated against the name of each firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as liable to be included in the income of the assessee under section 64(1) (iii). Thus, the Assessing Officer claimed to have reason to believe that the interest income had escaped assessment due to omission on the part of the assessee to disclose that income. Accordingly, section 147(a) was applied, which provision permits reopening of the assessment where income has escaped assessment due to omission of the assessee to make full disclosure. 9 The Tribunal held that the initiation of reassessment under section 147(a) was valid and the income by way of interest, paid to the minors on capital and accumulated profits of the partnership, was covered by section 64(1) (iii). 10 The Bombay High Court has, in the case of CIT v. Chandanmal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee which arises from the "benefits of partnership". Interest income, not being benefits of partner ship, cannot be clubbed under section 64(1) (iii). 17 We have not been shown any other provision in the Income-tax Act, under which such interest income could have been clubbed with the income of the mother of the minor children, i.e., the present assessee. If the interest had been earned on account of assets transferred to the minor child by the assessee's mother, which the minor child had invested or loaned to the firm, the case may have fallen under section 64(1)(v). The Department has not set up any such case. 18 The admission of the minor child to the benefits of the partnership in the family business being without any consi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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