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TMI Blog1964 (2) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... n the books of account he divided the balance of his capital account in four equal parts and made a gift of a sum of ₹ 74,721 to each of his four minor sons in July, 1953. Three of his sons have attained majority but the fourth son, Parmeshwar Agarwala, was a minor during the relevant accounting year. He was admitted to the benefits of the partnership in three firms known as (1) Jwalaprasad Mulchand, Dhubri (Assam), (2) Jwalaprasad Mulchand (Galla department), Dubri (Assam) and (3) Jwalaprasad Mulchand, Calcutta. The amount which is gifted by the father to the minor, Parmeshwar Agarwala, is found to have been invested in the firm of Jwalaprasad Mulchand, Dhubri. The other fact referred to in the statement of the case is that a sum of ₹ 11,000 out of the credit appearing in the personal account of Parmeshwar Agarwala in the account books of Jwalaprasad Mulchand, Dhubri, is transferred to the firm of Jwalaprasad Mulchand, Calcutta, during the previous year for the 1957-58 assessment year. In the firm of Jwalaprasad Mulchand (Galla department), Dhubri, no money of the minor has been invested. The shares of profit which the minor derived from the above three firms were inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thus in the opinion of the Tribunal the provisions of section 16(3)(a)( iv) were applicable both in respect of the interest on the original capital sum of ₹ 74,721 and the share incomes of the minor as derived from the above-mentioned three firms. So far as the two firms, namely, Jwalaprasad Mulchand (Galla department, Dhubri) and Jwalaprasad Mulchand, Calcutta, are concerned, there is neither any finding by the Tribunal that the minor contributed any money towards the capital of these firms out of the sum of ₹ 74,721, the amount of money transferred to the minor by his father, the assessee, nor is there any material for coming to such a finding. The Tribunal has held that the minor s share of profits in these two firms will be included in the income of the father, only on the ground that the three firms are allied firms and there must be an intimate financial connection subsisting between these firms and Messrs. Jwalaprasad Mulchand, Dhubri. What would be the extent of the financial connection between the two and whether any money out of the sum of ₹ 74,721 transferred to the minor was contributed by the minor towards the capital of the Calcutta and Galla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. The first circumstance is that the past record of the assessee shows that this objection was never raised before. On the other hand, in connection with the assessment for 1953-54, the assessee had claimed before the Tribunal that earned income allowance be granted by the department in respect of the share incomes of the minor which had been assessed in the hands of the father. The second circumstance is that the minor had been admitted as a partner in Jwalaprasad Mulchand, Dhubri, only because of the introduction of the initial capital of ₹ 74,721 in his name by his father. As regards the first circumstance pointed out by the Tribunal, the failure of the assessee to raise the said objection in the earlier proceedings does not debar him from raising the point that the minor s share of profits in the said firm cannot be regarded as the income of the assessee. This circumstance can also hot be regarded as evidence of the fact that the minor s share of profit in the firril arose out of the assets transferred by the father. The claim of the assessee in the assessment year 1953-54 that he should be granted earned income allowance in respect of the share incomes of the mino ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of the previous year of every individual, Hindu undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually. Thus the firm has also been made liable to pay income-tax under this section. For income-tax purposes the firms may be classified into two categories: (1) those which are registered under section 26A, and (2) those which are not registered. Under section 23 the Income-tax Officer has to determine both the tax payable by the firm as such and also the total income of each partner, that is, including his share of profits of the firm. The income, however, of the partner cannot be taxed twice over, one as forming part of the total income of the firm and then as his individual income. A minor, who has been admitted to the benefits of the partnership, is a partner for the purposes of the Income-tax Act and thus his share of profit will be included in his separate income and the income of the firm will also include his share of profit. The Income-tax Act has provided for the contingency to avoid double payment by the partner in the event of the firm paying tax on its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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