9911796707
TMI Blog1969 (9) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... he firm of M/s. Phool Chand Bajrang Lal, Azamgarh. He had four sons, namely, Lakshmi Narain Dalmia who was an adult on the relevant date and three minor sons, namely, Sarvasri Bansari Lal, Radhey Shyam and Girdhari Lal. The firm in question was constituted under an indenture made on November 3, 1956. The said partnership deed is on record and indicates that the partnership was started by the assessee and his adult son, Lakshmi Narain Dalmia. The minor sons were admitted to the benefits of the partnership in the firm. Under clause 6 of the partnership deed the parties (the assessee and Lakshmi Narain Dalmia) were entitled to the profits earned and had to contribute to the losses sustained by the firm in accordance with their respective share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 5,331, being the amount of interest received by the minor sons from the firm, be excluded from the total income of the assessee. The assessee's appeal challenged the order of the Appellate Assistant Commissioner on the ground that it had refused to allow him to agitate the plea constituting the capacity in which the assessee was assessed. The department's appeal was allowed and the assessee's appeal was dismissed by the Income-tax Appellate Tribunal, by its consolidated order dated March 17, 1962. The assessee applied to the Appellate Tribunal to refer to this court certain questions of law which were said to arise out of the Tribunal's order dated March 17, 1962. So far as the request for referring the question as to whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of interest and provided that interest at that rate should be paid by the firm if there were any deposits or moneys standing to the credit of the minors. It was held that the interest earned by the minors on the amount standing to their credit in the firm could not be included in the total income of the assessee under section 16(3)(a)(ii). It will be noticed that in the Bombay case there was no finding of fact reached by the Income-tax Appellate Tribunal to the effect that the interest was paid on capital invested and not on a loan or deposit. In the instant case, the Income-tax Appellate Tribunal had recorded a categorical finding that all the partners of the firm were originally members of a Hindu undivided family, that after effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income derived directly or indirectly by them from such admission. The basis of the decision was that the supply of capital by the minors was connected with their admission to the benefits of the partnership and the interest earned was an income derived, even if indirectly, from such admission. In other words, the view expressed was that if the minors had not been admitted to the benefits of the partnership, they could not have contributed to the capital and would not have earned any interest on it. The Assam case was followed by this court in Ram Narain Garg v. Commissioner of Income-tax wherein it was held by a Division Bench that the interest paid to a minor son admitted to the benefits of a partnership on his capital investment wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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