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TMI Blog1996 (5) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the assessee, in his account in the firm, Ashoka Cotton Company, in which he was admitted to the benefits of the partnership was includible in the total income of the assessee under section 64(1)(iii) of the Income-tax Act, 1961? " The only grievance of the assessee relates to the clubbing of interest income of Rs. 11,494 earned by her minor son, Assim Ahuja, who was admitted to the benefits of partnership in the firm, Ashoka Cotton Company, Abohar, by invoking the provisions of section 64(1)(iii) of the Act. This amount represents part of interest received by the minor from the aforesaid firm and there is no dispute about the inclusion of the share of profit of the minor in the assessee's hands. The minor had an interest income of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 94,200 which included a sum of Rs. 14,055, as interest income that accrued to her minor son, Assim Ahuja. Thereafter, she filed a revised return on September 23, 1976, declaring an income of Rs. 80,143 and in this return the amount of Rs. 14,055 representing interest income of the minor had been excluded. It may be mentioned that a sum of Rs. 12,544 was the interest that accrued to the minor from Ashoka Cotton Company and another sum of Rs. 1,511 came as interest from another firm, Tek Chand Daulat Rai. We are not concerned in this reference with the interest that accrued to the minor from Tek Chand Daulat Rai. The question of law referred by the Tribunal relates only to the interest income which accrued to the minor from Ashoka Cotton C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly --.... (iii) to a minor child of such individual from the admission of the minor to the benefits of partnership in a firm ; . . ." " Clause 6 of the partnership deed. --- That interest at the rate of 14 per cent. shall be paid to each partner on the capital, if any, for the time being standing to his credit. The rate of interest may be varied by mutual agreement in accordance with the market conditions. Clause 7. ---That any deposits made by the minors shall form a debt due by the firm and shall carry interest at the same rate as allowed on the capital contributed by the partners." There were similar provisions in the earlier partnership deeds as well and it is not necessary to refer to them for the purpose of answering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrangement or agreement. He allowed the firm to use the funds as he had interest in the profits of the firm. In our opinion, the interest earned by the minor definitely arose indirectly, if not directly, from his admission to the benefits of partnership in the firm and there is a connection between that income and his admission to the benefits of partnership which is squarely covered by section 64(1)(iii) of the Act and the income-tax authorities were thus justified in assessing the same in the hands of the assessee. It is not a deposit made by the minor within the meaning of clause 7 of the partnership deed executed between the partners. The view that we have taken finds support from the decision of the Supreme Court in S. Srinivasan v. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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