Clubbing of minor's partnership income under section 64(1)(iii) continues where interest arises from admission to benefits of firm.

Interest credited to the capital account of a minor admitted to the benefits of a partnership firm was held includible in the assessee's income under section 64(1)(iii) of the Income-tax Act, 1961. The Andhra Pradesh HC held that the 1976 amendment did not make any material difference to the scope of the provision, which continued to require clubbing of income arising directly or indirectly to a minor child from such admission. The Tribunal's finding that the credit was not shown to be a loan or deposit, and that the income arose because of the minor's admission to the firm's benefits, was accepted as justified.

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Issues: Whether interest income credited to the capital account of a minor admitted to the benefits of a partnership firm was includible in the assessee's income under section 64(1)(iii) of the Income-tax Act, 1961.

Analysis: The assessment year was 1976-77 and the question turned on the scope of section 64(1)(iii) as amended with effect from 1-4-1976. The Court held that the amendment did not create any material distinction for the issue and that the provision continued to require inclusion in the assessee's income of income arising directly or indirectly to a minor child from admission to the benefits of partnership. The Tribunal's finding that there was no evidence that the amount standing to the minor's capital account was a loan or deposit, and that the income arose because of the minor's admission to the benefits of the firm, was accepted as justified.

Conclusion: The interest income was includible in the assessee's income under section 64(1)(iii) of the Income-tax Act, 1961, and the question was answered against the assessee.

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