Clubbing of minor's deposit interest turns on whether partnership terms create the required nexus with admission to benefits.

Interest earned on deposits made by a minor admitted to the benefits of partnership was held to be income arising directly or indirectly from that admission where the partnership deeds required the minor to bring in specified capital or deposit amounts. The deposits were not treated as voluntary or independent of the partnership arrangement. On those facts, the necessary nexus existed between the interest income and the minor's admission to partnership benefits, so the interest was liable to be clubbed with the minor's income and the contrary view was rejected.

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Issues: Whether interest on deposits made by a minor admitted to the benefits of partnership is to be included in the minor's income as income arising directly or indirectly from such admission.

Analysis: The minor was required by the partnership deeds to bring in specified capital or deposit amounts, and the firms were not dealing with a voluntary deposit outside the partnership arrangement. On these facts, the interest on the deposits was treated as having the necessary connection with the minor's admission to the benefits of the partnership. The earlier finding excluding the interest from clubbing was held to have ignored the effect of the partnership terms requiring the deposits.

Conclusion: The interest income from the deposits was liable to be clubbed with the minor's income and the contrary view was rejected.

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