Clubbing of minor's partnership income requires a present right to receive profits before inclusion in the parent's assessment.

Section 16(3) of the Income-tax Act, 1922 applies only where the minor has a present legal right to receive the income. A minor's share of partnership profits can be clubbed with the father's income only if it is truly the minor's income under the statutory fiction. Where the minor attains majority and continues as a partner, the partnership does not end, and no vested right to any computed share arises merely because profits are calculated as on the date of majority; the right accrues only when accounts are made up under the deed. The amount in question was therefore not the minor's income for the relevant year and was not includible in the father's assessment.

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Issues: Whether, on the facts, the sum computed as the minor's share in partnership profits up to the date of attaining majority could be treated as the minor's income so as to be included in the father's total income under section 16(3) of the Income-tax Act, 1922.

Analysis: Inclusion under section 16(3) depends first on the amount being income of the minor child. The statutory fiction makes the minor's income the father's income only when the minor has a present legal right to receive that income by reason of admission to the benefits of partnership. Where a minor attains majority and elects to continue as a partner, the partnership does not break; the partner is then entitled only to the share of profits ascertained in the ordinary course when accounts are made up under the partnership deed. No debt or vested right to receive any part of the profits arises merely because a computation is made as of the date of majority. The decision in the later Supreme Court case on accrual of income confirmed that income accrues only when a right to receive it exists.

Conclusion: The amount of Rs. 2,49,459 did not constitute income of the minor for the relevant year and could not be included in the father's assessment under section 16(3). The answer to the reference was therefore in the negative, in favour of the assessee.

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