2004 (9) TMI 25

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....firm was not includible in the total income of the assessee as per section 64(1)(iii) of the Income-tax Act, 1961?" Briefly, stated the facts giving rise to the present reference are as follows: The present reference relates to the assessment year 1978-79. The respondent is an individual. His minor son, Master Vishal Swarup, was admitted to the benefits of partnership in the firm, M/s. Vishal Financiers, from which he enjoyed Rs. 1,843 as his share income and Rs. 5,529 as interest. The Income-tax Officer added the aforesaid two amounts under section 64(1)(iii) of the Act in the assessable income of the respondent which action has been confirmed by the Appellate Assistant Commissioner in the appeal filed by the respondent. In further appea....

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...., it had no direct or indirect nexus with the admission of a minor to the benefits of the partnership firm and, therefore, his income is not liable to be included under section 64(1)(iii) of the Act. He relied upon the following decisions: (i) CIT v. Smt. Triveni Devi [1971] 81 ITR 511 (All); and (ii) Shakuntla Devi v. CIT [2002] 253 ITR 450 (Delhi). Having heard learned counsel for the parties, we find that a sum of Rs. 5,529 had accrued as interest on the loan advanced by the minor - Master Vishal Swarup who was admitted to the benefit of the partnership firm - M/s. Vishal Financiers during the assessment year in question. Under section 64(1)(iii) of the Act all income which arises directly or indirectly from the admission of the mino....

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....dible in the total income of the assessee under section 64(1)(iii) of the Act. In the case of Subhash Chand [2005] 273 ITR 216 this court has held that the income earned on the deposits made by a minor in the firm would also be covered under the phrase "such income as arises directly or indirectly". In the aforesaid case the deposits were relatable to the admission of the minor to the benefits of the partnership firm. In the case of Shakuntla Devi [2002] 253 ITR 450 the Delhi High Court has held that a bare reading of the provision makes it clear that any interest which is received on accumulated profits would be relatable to the minors admission to the benefits of the partnership. It is only if by an independent volition on the part of the....