Clubbing of minor's partnership-linked income upheld under section 64(1)(iii) where the income arose from invested capital.

Income earned by a minor from capital invested in a partnership firm was held includible in the assessee's total income where the minor had been admitted to the benefits of the firm. The governing principle applied was that section 64(1)(iii) of the Income-tax Act, 1961 clubs income arising to a minor child when the source of that income is referable to the minor's admission to the benefits of a partnership. Interest earned on the invested capital was treated as sufficiently connected with that admission, so it was aggregated with the assessee's income.

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Issues: Whether the income earned by a minor from capital invested in a partnership firm, to the benefits of which the minor had been admitted, was includible in the assessee's total income under section 64(1)(iii) of the Income-tax Act, 1961.

Analysis: The referenced question turned on the reach of section 64(1)(iii), which brings within the assessee's total income income arising to a minor child from a partnership firm where such income is referable to the minor's admission to the benefits of the firm. The income in question was interest earned by the minor on capital invested in the firm, and the deciding principle was that where the source of the income is connected with the minor's admission to the benefits of the partnership, the amount is clubbed with the assessee's income.

Conclusion: The amount of Rs. 3,028 was rightly included in the assessee's income under section 64(1)(iii) of the Income-tax Act, 1961, and the answer to the reference was in the affirmative and against the assessee.

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