9911796707
TMI Blog1971 (3) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... -Kishore Chand, major, Vir Vijay, minor, and Vaneet Raja, minor. The joint Hindu family of the father and sons had a share in the partnership known as Kishanchand Gianchand. The joint family was represented by the karta, Gianchand. The other partners of this firm were Kidarnath, Anant Ram and Randhir Kumar. All the three other partners, besides the Hindu undivided family had one-fifth share. The share of the Hindu undivided family was four-fifths. On the 31st of March, 1958, a partial partition was effected amongst the members of the Hindu undivided family. Each of the four members divided the four-fifths in equal shares. The very next day, on 1st of April, 1958, a fresh deed of partnership was executed. The three other partners, Kidarnath and others, along with Gianchand and Kishore Chand, constituted the partnership. The share of Kidarnath and others was one-fifth, of Gian Chand one-fifth and of Kishore Chand one-fifth. The two minor sons of Gian Chand, Vir Vijay and Vaneet Raja, were admitted to the benefit of the partnership and they were entitled to the profits of the partnership to the extent of one-fifth each. As a result of the partial partition the share of each of the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them to the firm. There is no evidence on the record on which this finding can be supported. There is no dispute that if the amount was deposited by the minors with the firm, or was advanced by way of loan to the firm, the interest earned thereon would not be liable to tax in the hands of the assessee under section 64(ii) of the Income-tax Act, 1961. The real question that the Tribunal had to determine was missed by them, namely, in what manner the monies that fell to the share of the minors after partial partition of the Hindu undivided family were dealt with. If those amounts were the consideration for their getting the benefit of the partnership that was constituted on 1st of April, 1958, the amounts would certainly be liable to tax in the hands of the assessee in view of the decision of the Supreme Court in S. Srinivasan v. Commissioner of Income-tax. But, if those amounts were invested by the minors and had nothing to do with their being conferred benefits in the partnership constituted on 1st of April, 1958, the interest earned by those amounts would not be liable to tax in the hands of the assessee. There is no evidence on the record which would disclose the true nature of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of Shri Gian Chand, their father, under section 64 of the Income-tax Act. " After finding these facts the Tribunal recorded their findings as under : " After carefully reading the books of account we are of the opinion that the closest word that would cover the sums would be 'accretions'. By the word 'accretions' we mean the profits, if any, and interest credited to the account of Shri Vir Vijay which opened with the sum of Rs. 56,963. Similarly, the expression 'accretion' means the profits and interest, if any, credited to the account of Shri Vaneet Raja on the sum of Rs. 55,820.77 appearing on April 1, 1958. And, therefore, the question is whether accretion to capital is itself capital : To sum up : - (1) Vir Vijay : (i) The sum of Rs. 56,693 on April 1, 1958, is the initial capital contribution of Vir Vijay. (ii) The subsequent credits are ' accretions' thereto. (iii) There is no specific or written agreement on behalf of Vir Vijay and the partnership, M/s. Kishan Chand Gian Chand, as to whether they would be in the nature of capital or in the nature of credit-in-account. (iv) They arise from the original capital contribution. It will not be strictly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm cannot, on any principle, be equated with deposits made or loans advanced. The profits accumulated to the credit of the wife and the minor sons, because they did not draw their share of profits when distribution of profits took place, and allowed these profits to remain with the firm but there is no suggestion at all that, at that stage, either the wife or the minor sons, or anyone on their behalf, purported to enter into an arrangement with the firm to keep these accumulated profits as deposits. Similarly, there was no such contract which could convert those accumulations into loans advanced to the firm by these persons. The facts and circumstances indicate that the wife and the minor sons had earned these profits because of their membership of the firm or because of their admission to the 'benefits' of the firm, and having earned these profits in that capacity, they allowed the use of their profits to the firm without any specific arrangement as would naturally have been entered into if these funds had belonged to a stranger. They let the firm use funds of theirs, because they had interest in the profits of the firm. These facts also show that the use of these moneys was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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