Commissioner Of Income-Tax vs Ghewar Chand Kanuga
1997 Latest Caselaw 358 Del

JUDGMENT

1. In respect of the assessment year 1976-77, the following two questions have been referred for the opinion of this court, one at the instance of the Revenue and the other at the instance of the assessee :

At the instance of the Revenue :

"Whether, on the facts and in the circumstances of the case the Income-tax Appellate Tribunal is correct in law in holding that the interest income of Rs. 48,000 earned on the amounts transferred from the capital accounts of the minors to the fixed deposit accounts is not taxable in the hands of the assessee as per the provisions of section 64(1)(iii) of the Income-tax Act, 1961 ?"

At the instance of assessee :

"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally justified in concluding that the sum of Rs. 25,280 had been earned by the assessee's minor children from the admission of these minors to the benefits of partnership and hence the said sum was includible towards the total income of the assessee as per the provisions of section 64(1)(iii) of the Income-tax Act, 1961 ?"

2. Since the answers to the questions are concluded by a decision of this court following the decision of the Supreme Court, we dispense with the filing of the paper book.

3. In so far as the question referred at the instance of the Revenue is concerned, it may be noticed that the Tribunal has found that the amounts of Rs. 1,50,000 each in the case of Bharat Kumar and Manoj Kumar and Rs. 1 lakh in the case of Kumari Pushpa were transferred from their capital accounts and credited to separate fixed deposit accounts and has concluded that had there been no intention to treat them as separate loans, there was no necessity of any such transfer. In this view, the Tribunal has come to the conclusion that interest on these deposits cannot be said to be income arising directly or indirectly to the miners from their admission to the benefits of the partnership in the firm of Maharashtra Metal House and such interest, therefore, cannot also be assessed in the hands of the assessee under section 64(1)(iii).

4. In so far as the question referred at the instance of the assessee is concerned, the Tribunal has found that the amounts that were credited in the respective accounts of the minors in the books of the partnership were capital investments in the firm and, therefore, the interest credited to the accounts of the miners could legally be included in the assessment of the assessee. This court in Radhey Shyam Dalmia v. CIT [1992] 195 ITR 667 while relying upon the decision of the Supreme Court in S. Srinivasan v. CIT [1967] 63 ITR 273 has held that if any income arises to the minor as a result of or in consequence of the partnership deed, whether it be in the form of share of profit, commission, fee or even interest, it would be assessable in the hands of the father; but if there is an independent contract de hors the partnership agreement, whereby a loan is advanced by the minor to the firm in which he has been admitted to the benefits of the partnership, then that interest may not become liable to tax in the hands of the father. In this view, it cannot be held that the conclusion of the Tribunal that the interest on these deposits cannot be said to be income arising directly or indirectly to the minors on their admission to the benefits of the firm is wrong. The conclusion arrived at by the Tribunal is thus in consonance with the decision of the Supreme Court and this court.

5. Accordingly, both the questions are answered in the affirmative, that is the question referred at the instance of the Revenue is answered in favour of the assessee and against the Revenue and the question referred at the instance of the assessee is answered in favour of the Revenue and against the assessee. No costs.