SHAKUNTLA DEVI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN these two references, one each at the instance of the assessee and another at the instance of the Revenue, under s. 256(1) of the IT Act, 1961 (in short, the 'Act'), following questions have been referred by the Income tax Appellate Tribunal, Delhi Bench (in short, the 'Tribunal'), for opinion of this Court :

(2.) DISPUTE relates to the asst. year 1976 77. Factual position is almost undisputed and is as follows:

(3.) SCOPE of S. 64(1)(iii) came to be considered by this Court in Radhey Shyam Dalmia vs. CIT (1992) 104 CTR (Del) 180 : (1992) 195 ITR 667 (Del) : TC 42R.487. The apex Court had the occasion to deal with the ambit of S. 64(1)(iii) in S. Srinivasan vs. CIT (1967) 63 ITR 273 (SC) : TC 42R.317. A bare reading of the provision makes it clear that any interest which is received on accumulated profits would be relatable to the minors admitted to the benefits of the partnership. It is only if, by an independent volition on the part of the minors or their guardians, the accumulated profits are imparted with the character of a deposit or a loan and interest is earned thereon, such an income would escape from being assessed in the hand of the father, or mother, as the case may be. If any income arises to the minor as a result or in consequence of the partnership, whether it be in the form of a share or profit, commission, fee or even interest, the same would be assessable in the hands of the father, or the mother, as the case may be, but if there is independent agreement de hors the partnership agreement, whereby a loan is advanced by a minor to the partnership concern in which he has been admitted to the benefits of the partnership, then that interest would not be liable to income tax in the hands of the father or mother, as the case may be. To put it differently, there has to be a nexus between the income of the minor and his admission to the benefits of the partnership. Above being the position, both the questions are answered in the affirmative, first one in favour of the assessee and the second one in favour of the Revenue. References are disposed of.