1980 (5) TMI 62 - AT - Income Tax

Tribunal excludes minors' deposit interest from assessment under section 64(1)(iii)

The Tribunal dismissed the appeal, affirming that the interest payable on deposits by minors should not be included in the assessee's assessment under ... - Issues:1. Inclusion of interest and share falling to minors under section 64(1)(iii) of the Act.Detailed Analysis:The judgment involved a case where the assessee, an individual, had minor sons admitted to the benefits of partnership in two firms. The question was whether the interest and share falling to the minors should be included in the assessment of the assessee under section 64(1)(iii) of the Act. The partnership deeds did not require the minors to contribute capital, but allowed them to charge interest on any investments made. The Income Tax Officer (ITO) considered the investments made by the minors as capital, thus including the interest in the assessment.The assessee appealed to the Appellate Assistant Commissioner (AAC), who held that the amounts invested by the minors were not capital, and therefore, the interest on such deposits should not be included under section 64(1)(iii) of the Act. The AAC's decision was based on established authorities and reasoned analysis.The Department appealed to the Appellate Tribunal, arguing that the interest credited to the minors should be included in the assessee's assessment, citing decisions from the Madras High Court and the Supreme Court. The assessee's counsel relied on the partnership deed clauses and decisions from the Allahabad High Court to support their position.After careful consideration, the Tribunal held that the Department's argument was not valid. The Tribunal emphasized that the minors were not obligated to contribute capital, and the partnership deeds indicated that any investments made by them were not considered capital. Referring to previous court decisions, the Tribunal concluded that the interest on deposits by minors should not be included in the assessee's total income under section 64(1)(iii) of the Act.The Tribunal distinguished the cases cited by the Department, noting that they involved different circumstances where interest was earned on accumulated profits, unlike the present case where interest was paid on deposits from gifts received by the minors. Ultimately, the Tribunal upheld the AAC's decision, ruling that the interest on deposits made by the minors should not be treated as income arising from their admission to partnership benefits and should not be included in the assessee's total income.In conclusion, the appeal was dismissed, affirming that the interest payable on deposits by minors should not be included in the assessee's assessment under section 64(1)(iii) of the Act.