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TMI Blog1984 (6) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... a sum of Rs. 101 on 22-6-1974. Subsequently she made another deposit of Rs. 3,500 on 14-3-1975. There were various other deposits in her account as also withdrawals in different years. In the present appeals, we are concerned with the assessment years 1978-79 to 1980-81. In these years, she was credited with profit as well as interest from Kanpur Textile Agents. 3. The ITO brought to tax both the share and interest falling to Vandana Kapoor from the aforesaid firm in the assessments of the assessee of the above assessment years under section 64(1)(iii) of the Income-tax Act, 1961 (' the Act '). This section lays down that in computing the total income of any individual, there shall be included all such income as arises directly or indire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 154 of the Act with the AAC contending that he had failed to notice the decision of the Allahabad High Court in the case of CIT v. Smt. Triveni Devi [1971] 81 ITR 511, which constituted a mistake apparent from record requiring rectification. 6. The AAC passed an order under section 154 on 14-3-1983. Following another order of the Allahabad High Court itself in the case of Kaladhar Prasad Chaturvedi v. CIT [1971] 82 ITR 713, he held that the interest earned by Vandana Kapoor from the firm of Kanpur Textile Agents could not be assessed in the assessments of the assessee for the assessment years 1979-80 and 1980-81. He, accordingly, allowed the assessee's appeals for these years. He, however, held that similar benefit could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12-1976, which according to the learned counsel for the assessee, was applicable to the assessment year 1978-79. 9. A new deed of partnership was executed on 1-4-1978 regarding the constitution of Kanpur Textile Agents. In this deed, the following two clauses are relevant : " 5. That the capital required for the partnership business shall be arranged contributed by the partners in such proportion and in such manner as may be mutually agreed upon between them from time to time. 6. Interest at 15 per cent per annum shall be allowed or charged on the balances in the partners' capital accounts. The amount brought in by the minors and their share of profit credited to their accounts in the firm shall be treated as deposits and carry int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners has and is willing to give such amount, he may advance (such amount) as loan. He may receive interest for such sum at the rate of 12 per cent per annum.' For a number of years up to the previous year relevant to the assessment year 1957-58, the shares of profits of the wife and the minor sons were allowed to accumulate without interest. With effect from that previous year the firm decided to allow 9 per cent interest per annum on these accumulated profits. The question was whether the interest so allowed was assessable in the hands of the appellant under section 16(3)(a)(i) and (ii) of the Indian Income-tax Act, 1922. It was held that the interest accrued to the wife and the minor sons at least indirectly because of their capacity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accumulated profits in the firm as her deposits. This principle was also accepted by the Allahabad High Court in the case of Kaladhar Prasad Chaturvedi. The Court observed at page 716 of the report that the decision in the case of S. Srinivasan implied that in case the circumstances of a case justified the conclusion that the interest was earned by a minor on the deposit made by him, the same could not be included in the income of the father under section 64. The Court further observed that the observations made in the above case showed that it was open to the parties to agree to treat the accumulated profits as loan. We, therefore, hold that the interest earned by Vandana Kapoor could not be included in the assessment of the assessee under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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