Minor partner interest income treated as attributable to partnership benefits and included in the assessee's total income

Interest credited on capital introduced by a minor admitted to the benefits of partnership is income arising directly or indirectly from that admission and is includible in the partner-assessee's total income under section 16(3)(a)(ii). The court treated the interest as attributable to the minor's admission to partnership benefits, not as an independent source of income. On that basis, the amount was held liable to be included in the assessee's total income, and the reference was answered in favour of the revenue and against the assessee.

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Issues: Whether interest earned by the minor son on capital subscribed by him in a firm, where the assessee was also a partner, was includible in the assessee's total income under section 16(3)(a)(ii).

Analysis: Section 16(3)(a)(ii) required inclusion in the individual's total income of income of a minor child arising directly or indirectly from admission of the minor to the benefits of partnership in a firm of which that individual is a partner. Interest credited on capital introduced by the minor was held to be income attributable to that admission, because the capital itself was brought into the firm by reason of the minor being admitted to the benefits of partnership. The credited interest was, therefore, treated as income arising from such admission and not as a separate independent source of income.

Conclusion: The sum of Rs. 5,791 was liable to be included in the assessee's total income; the question was answered in the affirmative and against the assessee.

Ratio Decidendi: Interest earned on capital introduced by a minor admitted to the benefits of partnership is income arising directly or indirectly from that admission and is includible in the partner-assessee's total income under section 16(3)(a)(ii).

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