1984 (4) TMI 140 - AT - Income Tax

Tribunal rules interest income for minors exempt under Income Tax Act, allows deduction for conveyance expenses

The Tribunal rejected the Department's appeals concerning the inclusion of interest income credited to minor sons' deposit accounts under section 64 of ... - Issues:- Inclusion of interest income credited in the accounts of minor sons in deposit accounts under section 64 of the Income Tax Act.- Allowance of deduction for conveyance expenses out of commission income.Analysis:Issue 1: Inclusion of interest income under section 64The appeals under consideration involved a common issue regarding the inclusion of interest income credited in the accounts of minor sons in deposit accounts under section 64 of the Income Tax Act for the assessment years 1977-78 and 1979-80. The Department contended that the interest income should be includible, citing specific case laws to support their argument. On the other hand, the assessee argued against the inclusion, relying on different case laws. The Tribunal examined the facts of the case where minor sons had two accounts in the firm - a capital account and a deposit account. The Tribunal noted that there was unanimity among various High Courts that interest credited in the deposit account of minors, which they were not obliged to introduce for partnership benefits, should not be included under section 64. The Tribunal referred to previous judgments, including one from the Bombay High Court, which emphasized the necessity of a nexus between the income and the admission to partnership benefits for section 64 to apply. Based on the principles established in the cited cases, the Tribunal held that the interest credited in the deposit account of minors was not includible in the total income of the assessee. Therefore, the appeals on this issue were rejected.Issue 2: Allowance of deduction for conveyance expensesIn the assessment year 1979-80, an additional issue arose regarding the allowance of a deduction for conveyance expenses out of commission income. The Department contended that the standard deduction against salary income should cover conveyance expenses, and there was no justification for a further deduction. However, the assessee argued that the deduction was given out of commission income, which was a separate source of income requiring separate consideration. The Tribunal considered both arguments and agreed with the assessee, stating that the standard deduction against salary income did not apply to commission income. The Tribunal found merit in the contention that the assessee had to incur conveyance expenses while earning commission income, justifying the allowance of the deduction. Consequently, the departmental appeal on this issue was dismissed.In conclusion, the Tribunal dismissed both appeals of the Department, holding in favor of the assessee on the issues of interest income inclusion under section 64 and the allowance of deduction for conveyance expenses out of commission income.