9911796707
TMI Blog1979 (1) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... buted a capital of Rs. 42,753. By a subsequent deed dated 24th October, 1957, the assessee's other minor son, K. S. Nashte, was admitted to the benefits of the partnership and he had contributed a capital of Rs. 25,000 as provided in cl. 3 of the partnership deed. It is common ground that the capital contributions made by the three minor sons of the assessee came out of the assets received by them on a partial partition of their HUF property. By a letter dated 1st of November, 1958, written by the assessee in his capacity as guardian of his three minor sons he instructed the firm to transfer a sum of Rs. 64,500 from the capital account of the two minors, A. S. Nashte and R.S. Nashte, and a sum of Rs. 42,000 from the account of the third min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal observed that if the assessee, instead of transferring a part of the minors' capital accounts to the loan accounts opened in their names, had chosen to take out that portion of the capital and invested it somewhere else, the interest earned thereon would not have been taxed as the income of the assessee. The revenue was aggrieved by the view taken by the Tribunal and the AAC and the following question has, therefore, been referred to this court under s. 256 (1) of the I. T. Act, 1961, for the assessment years 1962-63 to 1964-65 : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the interest credited to the loan account of the minors in the books of the firm was not includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital and which were then transferred to the loan accounts belonged to the minors in their own right because they came to them as their share at the partition of the property of the joint Hindu family. The assessee acting as the guardian of the minors could well have invested moneys belonging to the minors in any other manner or, as it is not disputed by Mr. Joshi, they could initially have been advanced as loan to the partnership firm. There was no obligation on any of the minors to advance any moneys by way of loans to the partnership firm and it is not that unless he advanced that amount by way of loan, he could not be admitted to the benefits of the partnership. It is true that the moneys initially were contributed as capital of the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be included in the total income of the assessee under s.16(3)(a)(ii) of the Indian I. T. Act, 1922, which was the corresponding provision under that Act. In that case, the assessee had started a partnership business with his major son and admitted to the benefits of partnership his two minor sons. In the relevant assessment year, the share of profit of each of the minors was included in the total income of the assessee under s. 16(3)(a)(ii) of the Indian I. T. Act, 1922, and the question which had to be decided by this court was whether interest which the minors received on deposits standing to their credit in the firm could not be included in the total income of the assessee under s.16(3)(a)(ii). In that case, it was found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of an HUF and the erstwhile coparceners of the family formed a partnership to carry on the business. Two minor sons of the assessee, who was the karta, were admitted to the benefits of the partnership. The capital of the business was also divided among the coparceners and a sum of Rs. 25,788.89 forming part of the initial capital came to be credited in the name of each of the erstwhile coparceners including the two minor sons. Clauses 4 and 5 of the partnership deed, in that case, showed that no obligation was cast on the minors to bring in any capital, but at the same time there was also no bar to their bringing in any capital. Clause 6 provided for payment of interest on the capital. The question was whether the interest credited on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands of the assessee under s. 16(3)(a)(i) and (ii) of the Indian I. T. Act, 1922. The Supreme Court held that the interest accrued to the wife and the minor sons at least indirectly because of their capacity mentioned in s. 16(3)(a)(i) and (ii) were, therefore, assessable in the appellant's hands. In that case, the Supreme Court also pointed out that the cases where interest is earned on a deposit or loan differ from cases where interest is earned on the accumulated profits arising from the firm itself. Mr. Joshi had relied on the decision in Srinivasan's case [1967] 63 ITR 273 (SC). But, as we have earlier pointed out, the ratio of that decision was considered in detail in Chandanmal's case [1978] 112 ITR 296 (Bom) and it was held by this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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