COMMISSIONER OF INCOME TAX Vs. SEGU HARNATH

JUDGEMENT

(1.) THIS reference under the IT Act relates to the three asst. years 1978 79, 1979 80 and 1980 81. The CIT sought this reference and the following three questions were referred by the Tribunal under s. 256(i) of the IT Act:

(2.) WE may point out that questions Nos. 1, 2 and 3 relate to the asst. years 1978 79, 1979 80 and 1980 81, respectively.

(3.) IN connection with the income tax assessment for the year 1978 79 of the assessee, the income of the minor daughter was not included initially under S. 64(1)(iii) of the Act. For the asst. yrs. 1979 80 and 1980 81, the ITO realised that the share income of the minor daughter was liable to be included in the total income of the assessee under S. 64(1)(iii) of the Act. Consequently, in the regular assessments for the years 1979 80 and 1980 81, the share income arising to the minor daughter was so included. In connection with these two assessments, the assessee claimed that interest on monies borrowed and invested in the partnership firm on behalf of the minor for the purpose of construction of dall mill should be deducted from the share income and only the resultant income included in his total income under S. 64(1)(iii) of the Act. It was claimed that interest of Rs. 8,839 and Rs. 8,533 were paid on the monies borrowed by the minor daughter and deduction of these two sums from the share incomes was claimed. The ITO declined to accept the aforementioned claim of the assessee. At the same time, the ITO revised the income tax assessment for the year 1978 79 under S. 154 of the IT Act as if there was a patent and self evident error. In an order passed under S. 154 of the Act, the ITO likewise included the share income of the minor daughter in the total income of the assessee rejecting the contention that the interest of Rs. 9,435 paid for this assessment year should be allowed as a deduction.