COMMISSIONER OF INCOME TAX Vs. CHANDANMAL KASTURCHAND

JUDGEMENT

(1.) THESE two references which have been made by the Tribunal to this Court under S. 66(1) of the Indian IT Act, 1922, and S. 256(1) of the IT Act, 1961, could be conveniently disposed of by a common judgment, inasmuch as the facts giving rise to the two questions which have been referred to us in each are common and the questions pertain to whether interest credited to the accounts of the respective minor sons of the assessee are liable to be included in the assessee's total income under S. 16(3)(a)(ii) of the 1922 Act, and under S. 64(ii) of the 1961 Act though for different assessment years.

(2.) IN the first reference (No. 27 of 1967) the precise question referred to us for our determination runs thus :

(3.) THE assessee, Chandanmal Kasturchand, is an individual. He has two major sons, Gulraj and Bhupatrai, and two minor sons, Mahendra Kumar and Devendra Kumar. He was also the Karta of a joint family which carried on business in cloth in the name and style of Chandanmal Kasturchand Rathod at Mulji Jetha Market, Bombay. On October 31, 1959, there was a partial partition in the joint family, the facts whereof were recorded in a joint declaration dated February 22, 1962, made by the adult members of the joint Hindu family, viz., Chandanmal Kasturchand, Gulraj Chandanmal Rathod, Bhupatrai Chandanmal Rathod, and Jivabai, wife of Chandanmal. By that declaration, the declarants confirmed that the partial partition of certain assets of the joint family had taken place on October 31, 1959, and on such partition the said assets were divided in certain manner between the members of the joint family and it was further declared that the said joint family business that was being carried on in the name and style of Chandanmal Kasturchand was divided amongst the members of the said joint family and that such division had been recorded in the books of the said business. Admittedly, the capital of the joint family business was divided equally amongst the six persons (Chandanmal, Gulraj, Bhupatrai, Mahendra Kumar, Devendra Kumar and Jivabai) w.e.f. November 1, 1959. The business which was carried on by the family was converted into a partnership business under an agreement in writing dated October 19, 1960. Under the deed, the partnership was declared to have come into existence on April 26, 1960. There are three parties to this agreement, viz., the assessee, Chandanmal, and his two major sons, Gulraj and Bhupatrai. The two minor sons, Mahendra Kumar and Devendra Kumar have been admitted to the benefits of the partnership. In the account of each one of them on the opening date, namely, November 1, 1959, being the 1st day of Samvat year 2016, a sum of Rs. 25,788.89 was credited. It may be stated that the firm itself was registered under S. 26A of the 1922 Act for the asst. year 1961 62 and under the corresponding provisions of the 1961 Act for the subsequent asst. yrs. 1962 63 and 1963 64. The following sums were credited to each of the accounts of the two minor sons as interest, viz.: