Clubbing of minor's interest income fails where deposits with the firm are voluntary and not linked to partnership benefits.

Interest earned by minor sons on amounts voluntarily left with a firm was held not to fall within the father's clubbing liability under Section 16(3)(a)(ii) of the Indian Income-tax Act. The provision applies only where a minor's income arises directly or indirectly from admission to the benefits of a partnership; here, the partnership deed merely provided for interest on credit balances and did not require the minors to keep deposits with the firm or obligate the firm to retain them. Because the income arose from voluntary deposits, and the taxing fiction had to be strictly construed, it could not be extended to cover such interest. The income was therefore not includible in the assessee-father's total income.

---

---

Issues: Whether interest earned by minor sons on amounts standing to their credit in the firm was includible in the assessee-father's total income under Section 16(3)(a)(ii) of the Indian Income-tax Act.

Analysis: Section 16(3)(a)(ii) applies only where income arises to a minor directly or indirectly from admission to the benefits of a partnership. The partnership deed merely fixed interest on money standing to a partner's credit and did not compel the minors to keep deposits in the firm or oblige the firm to retain them. The interest was earned because the minors chose to keep their moneys with the firm, not because of their admission to the partnership. The provision creating the father's liability being a taxing fiction, it had to be construed strictly and could not be extended to cover income that was not connected with the minors' admission to partnership benefits.

Conclusion: The interest earned by the minor sons on their deposits was not includible in the assessee's total income under Section 16(3)(a)(ii), and the question was answered in the negative, in favour of the assessee.

Ratio Decidendi: For Section 16(3)(a)(ii) to apply, the minor's income must arise directly or indirectly from admission to the benefits of the partnership; interest earned merely on voluntary deposits with the firm is not such income.

---