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TMI Blog1976 (1) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... transferred a sum of Rs. 60,000 to his wife by name Tulasi Ammal on 7th January, 1958. She entered into a partnership with her son, Hunumantha Rao, under a deed dated 6th July, 1958. The firm was known as Indian Sandal Oil Industries. This firm was granted registration under the Income-tax Act. We are concerned in the present reference with the assessment year 1962-63. For the earlier year, namely, 1961-62, she had earned a sum of Rs. 2,385 as her share of profits and this sum was sought to be included in the assessment of the assessee. The assessment so made was disputed in appeal. For the assessment year 1962-63, she earned a sum of Rs. 4,189 as interest on the said sum of Rs. 60,000 transferred by her husband. The share of profit exclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Supreme Court rendered under section 16(3) of the Indian Income-tax Act, 1922, in Commissioner of Income-tax v. Prem Bhai Parekh. In that case the assessee was a partner in a firm having 7 annas share therein. He retired from the firm on the 1st of July, 1954. He gifted Rs. 75,000 to each of his four sons, three of whom were minors. There was a reconstitution of the firm with effect from 2nd July, 1954, whereby the major son became a partner and the minor sons were admitted to the benefits of the partnership. The question was whether the income arising to the minors by virtue of their admission to the benefits of the partnership in the firm could be included in the total income of the assessee Under section 16(3)(a)(iv) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dual made gifts to his wife and the wife invested the sum in a firm and became a partner. She received a share of profits of the firm. The question was whether the share of profit was liable to be assessed in the hands of the husband. It was held that as the profit arose primarily, because the partnership made a profit, though that has a connection with the gift, it did not arise as a result of the gift and that the income arose only because the other partners had agreed to take her as a partner. As taking her as a partner was not as a result of the gift, it was held that the income of the share of profits in the firm could not be included in the total income of the husband under the provisions of section 64(iii). We are of the same view. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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