9911796707
TMI Blog1971 (3) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... Allahabad, has referred the following question for the opinion of this court : " Whether, on the facts and circumstances of the case, the amount of interest standing to the credit of each minor son of the assessee in the said firm was rightly included in the income of the assessee under section 64 of the Income-tax Act, 1961?" The facts giving rise to this reference are that the assessee, Kaladhar Prasad, is a partner in a firm known as Messrs. Kaladhar Prasad and Sons and his three minor sons, namely, Rakesh Kumar, Updesh Kumar and Lokesh Kumar, were admitted to its benefits. While making assessment for the year 1962-63, the Income-tax Officer included in the assessee's income, the share of profit of minor partners in the firm amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mily business as a partnership business. Clause (4) of the deed provided that the capital necessary for the purposes of the business was to be supplied by the partners alone, i.e., by Kaladhar Prasad Chaturvedi and Mahesh Prasad Chaturvedi. The minors were not liable to provide any capital. The money credited in the names of the partners was to be deemed to be capital of the business and money credited in the names of the minors was to be their deposit with the firm. On such capital or deposits of the partners or minors, interest at the rate of 6% was payable by the firm. The deed further recited that the three minors who had been admitted to the benefits of the firm were to get one anna share in the profits of the firm. It was in pursuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal inferred that the interest was earned by the minors on the amount outstanding in their names, directly or indirectly, in their capacity as partners admitted to the benefits of the firm within the meaning of section 64 of the Income-tax Act. In its opinion, the facts of the present case are distinguishable from the facts of the case of Bhogilal Laherchand v. Commissioner of income-tax and are akin to those of Choitthmal Kejriwal v. Commissioner of Income-tax. The two cases, Bhogilal Laherchand and Chouthmal Kejriwal were noticed by the Supreme Court in the case of S. Srinivasan v. Commissioner of Income-tax. In that case a question arose whether interest paid to a minor on accumulated profits was earned by him directly or indire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nors are admitted to the benefits of a firm either because they do some work for it or because they bring in some capital. There is nothing on the record of this case to indicate that the minors were admitted to the benefits of the firm for doing its work. According to him, all these circumstances indicate that the amount standing in the name of the minor was the capital contributed by him. So far as the circumstance that the account standing in the name of a minor was treated in the same manner in which the account standing to the credit of the adult partners was treated is concerned, we find that the only treatment meted out to the account standing to the credit of the minors was that the share of profits earned by them from business a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of the credit standing in the names of the minors, these credits were not to be treated as their capital contribution. Under the partnership deed the minors were not required to contribute any capital. The circumstances pointed out by learned counsel for the revenue are quite consistent with the position that the amount standing to the credit of the minors were in the nature of their deposits. They do not detract from the clear intention of the parties as indicated in the partnership deed. Whatever may have been the position, had there been no such clear recital about the intention of the partners in the partnership deed, the circumstance pointed out by the learned counsel for the revenue neither singly nor cumulatively show that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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