KALADHAR PRASAD CHATURVEDI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the assessee, Sri Kaladhar Prasad Chaturvedi. The Income-tax Appellate Tribunal, Allahabad, has referred the following question for the opinion of this court:

(2.) ORIGINALLY, there was a joint family business which was being run in the name of Messrs. Kaladhar Prasad and Sons. On 20th October, 1958, the family business was converted into partnership business and the three minor sons of Kaladhar Prasad were admitted to its benefit. At the time of partition of the family business, each of the minors got a sum of Rs. 19,966 which was credited to their accounts in the books of the firm.

(3.) THE two cases, Bhogilal Laherchand and Chouthmal Kejriwal were noticed by the Supreme Court in the case of S. Srtnivasan v. Commissioner of Income-tax, [1967] 63 I.T.R.273, [1967] I.S.C.R. 727 (S.C.)? In that case a question arose whether interest paid to a minor on accumulated profits was earned by him directly or indirectly by his admission to the benefits of the partnership firm. While discussing the question involved fn that case, the learned judges distinguished the case of Bhogilal Laherchand on the ground that the facts of that case were not applicable to the case before them as the interest accruing to the wife and minor sons of the appellant was not the result of any deposit made by them with the firm. THE decision implied "that in case the circumstances of a case justified the conclusion that interest was earned by a minor on the deposit made by him, the same could not be included in the income of the father under Section 64. Observations made in this case show that it was open to the parties to agree to treat the accumulated profits as loan.