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TMI Blog1973 (10) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... ance (such amount) as loan. He may receive interest for such sum at the rate of 12 annas per cent. per mensem." Based on the above provision the interest on accumulated profits was credited for the first time in the previous year ending 30th September, 1956. The amounts standing to the credit of the assessee's wife and his two minor sons as on October 1, 1955, on capital and current accounts were as under : Capital Current account account Rs. Rs. Shanbagammal (assessee's wife) 750 65,662 Murali (assessee's minor son) 900 59,938 Mohan " " 750 65,662 On September 30, 1956, the amounts standing to the credit of the capital accounts of the above persons were transferred to their respective current accounts. With the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of the wife and the two minor sons in the books of the firm and these interest amounts were included in the assessee's total income by the Income-tax Officer under section 16(3)(a)(i) and (ii) of the Indian Income-tax Act of 1922. The said inclusion was challenged by the assessee. This court in S. Srinivasan v. Commissioner of Income-tax held that the interest credited arose directly from the membership of the wife in the firm and the admission of the minor sons to the benefits of the partnership, and, therefore, such interest had to be included in the total income of the assessee. The matter was ultimately taken to the Supreme Court and the decision of this court was affirmed by the Supreme Court in S. Srinivasan v. Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the current account of the assessee's minor son, Murali, is includible to the extent of Rs. 8,608, Rs. 10,071, Rs. 11,023 and Rs. 1,261 in the assessment of the assessee under section 16(3)(a)(ii) of the Indian Income-tax Act, 1922, for the assessment years 1958-59 to 1961-62?" 3. Whether the interest credited by the firm of Anjaneya Motor Transport to the current account of the assessee's minor son, Mohan, is includible to the extent of Rs. 5,269, Rs. 5,750 and Rs. 5,737 in the assessment of the assessee under section 16(3)(a)(ii) of the Indian Income-tax Act 1922, for the assessment years 1958-59, 1959-60 and 1960-61 ?" In the judgment just now rendered by us in T.C. No. 95 of 1968 (Smt. Nripendrakumari Bhandari v. Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the earlier partnership to the accounts of the new partnership should be taken to be a loan or deposit and the interest paid thereon by the firm should be taken not to arise from the membership of the wife in the firm or the admission of the minors to the benefits of the partnership. Admittedly, the rate of interest payable on their credit balances has to be decided by the firm from time to time and not at the rate referred to in section 13(d) of the Partnership Act, nor is there any indication in the partnership deed that the rate of interest paid to the wife and the minors is the same as that paid to third parties. Therefore, it cannot be said that the firm paid the interest to the wife and the minors in pursuance of an obligation c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir share of profits should be taken to have arisen from their connection with the partnership. The main question is whether the amounts at their credit in the current account can be taken to be a loan or deposit. The assessee's learned counsel contends that in view of the clause in the partnership deed providing for interest on their credit balances, it should be taken that it is a loan or deposit. But it is not possible for us to treat the credit balances as loans or deposits made by the wife and the minors. In respect of a loan the borrower must require the amount and he must have the option to return the loan if he so chooses. Same is the position in the case of a deposit. The depositee must have an option either to accept the deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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