Clubbing of minor's interest income fails absent proof of nexus with partnership benefits under the Income-tax Act.

Clubbing of a minor's interest income under section 64(1)(iii) of the Income-tax Act, 1961 requires a demonstrated nexus between the income and the minor's admission to the benefits of partnership. Where no material establishes that the minors' deposits or interest arose from that partnership benefit, the interest cannot be taxed in the assessee's hands merely because it was received by the minors. On that basis, the interest income was excluded from the assessees' taxable income, and the appellate orders were sustained.

---

---

Issues: Whether the interest income received by the minors was includible in the assessees' taxable income under section 64(1)(iii) of the Income-tax Act, 1961 on the footing that it arose from admission of the minors to the benefits of partnership.

Analysis: The findings recorded by the Appellate Assistant Commissioner were not controverted. No material was placed to establish a link between the minors' deposits or the income earned by them and the alleged benefits of partnership. In the absence of such nexus, the mere receipt of interest by the minors could not justify clubbing the amount in the assessees' hands under the relevant provision.

Conclusion: The interest income of the minors was not liable to be included in the assessees' taxable income under section 64(1)(iii) of the Income-tax Act, 1961, and the assessees succeeded on this issue.

Final Conclusion: The appellate orders excluding the minors' interest income were upheld, and the Revenue's appeals failed.

Ratio Decidendi: Clubbing under section 64(1)(iii) requires a demonstrated nexus between the income sought to be assessed and the admission of the minor to the benefits of partnership.

---