ADDITIONAL COMMISSIONER OF INCOME TAX Vs. MISRIMUL SOWCAR

JUDGEMENT

(1.) IN this reference, the Tribunal has referred the following question for the opinion of this court :

(2.) THE assessee is an individual. THE assessment under consideration is for 1972-73. He was a partner in a firm called Messrs. Misrimul Bhawarilal, Kancheepuram. This partnership itself came into existence on a partial partition of the movables in the HUF of the assessee and his sons on 1st June, 1964. On the same day, a partnership deed was executed between the assessee and his three major sons to carry on the business of pawn broking. His three minor sons were admitted to the benefits of partnership. Each of the three minor sons was credited with a capital of Rs. 1,100. THE capital amount was not to carry any interest. Under Clause 3 of the partnership deed, it was provided that:

(3.) THE contention for the revenue was that whatever is computed in the hands of the minor as share income from the firm will have to be included in the assessment of the father, i.e., the assessee in the present case. Learned counsel for the assessee submitted that the addition in respect of the income accruing to a minor child from the admission of the minor to the benefits of the partnership would only include the share income and the interest on capital. According to the learned counsel, Clause 3 of the partnership deed in particular terms specified that apart from the capital contribution, which did not bear any interest, the amounts standing to the credit of the minor, including accumulated profits, would be treated as loan and would, therefore, qualify for payment of interest. In the submission of counsel this interest is paid, not because of the admission of the minor to the benefits of partnership, but because of the use of the minor's funds in the partnership.