1982 (12) TMI 66

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....ughter of V.I. Joseph. The interest paid to each of the minor children by the firm, which was included, is as under : INTEREST Name of the minor Current account Capital account Loan account Total Rs. Rs. Rs. Rs. Kum. Reeba John 1,331 900 720 2,951 Kum. Marina John 1,331 900 720 2,951 Kum. Susan John 1,331 900 720 2,951 Kum. Reena John 1,332 900 720 2,952 According to the ITO all that was required to be established was proximity of the admission to the benefits of partnership and the income derived therefrom. He held that there was a direct and close affinity and, therefore, the amount in question had to be included. 2. in appeal, the AAC referred to the decision of the Bombay High Court in CIT v. Chandanmal Kastur....

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....on the decisions of the Bombay High Court in the case of Chandanmal Kasturchand and CIT v. S.V. Nashte [1979] 119 ITR 130. According to him, there was no warrant for making any addition of the interest in the present case under the provisions of section 64(1)(iii). 4. The learned departmental representative relied on the commentary in relation to the provisions of section 64(1)(iii) in Chaturvedi and Pithisaria's Income-tax Law, Third Edition, Vol. 2 at pp. 1845 and 1846, where there is a fall narration of the case law for supporting aggregation. He also submitted that the minors were required to contribute capital in terms of clause 4 of the partnership-deed and since this was one of the conditions for admission to the benefits of partn....

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....tnership and receipt of interest on such balance did not have a direct nexus or even indirect nexus with the admission of the minors to the benefits of partnership. Having regard to the various judicial pronouncements referred to, we consider that the ratio of the decisions of the Bombay High Court relied on by the assessee applies and there is no warrant for including the interest amounts in the current account and loan account, that is, Rs. 1,331, in each case in the current account (except in the case of Miss Reena John where it is Rs. 1,332) and Rs. 720 in each case in the loan account, in the hands of the appellant under the provisions of section 641l)(iii). 7. Before parting with the appeal, we would mention one more contention whi....