COMMISSIONER OF INCOME TAX Vs. BADRILAL BHOLARAM

JUDGEMENT

(1.) THIS consolidated reference under Section 66 (1) of the Indian Income-tax Act, 1922, by the Income-tax Appellate Tribunal at the instance of the Commissioner of Income-tax arises out of the Tribunal's common order disposing of the assessee's appeals for the assessment years 1956-57, 1957-58, 1958-59 and 1959-60. The question, which has been referred to this Court for decision, is:

(2.) THE material facts are that the assessee Badrilal, his three major sons and a minor son Sureshchandra constituted a Hindu undivided family till or about 11th September 1955. THE undivided family was carrying on business of forest contracts. On or about 11th September 1955, there was a partial partition of the family as regards the business of forest contracts. In this partition, the business capital of the Hindu undivided family was divided between the father and his sons. On 12th September 1955, a partnership consisting of Badrilal and his three major sons for carrying on the business of forest contracts was brought into existence by a partnership deed. THE minor son Sureshchandra was admitted to the benefits of the partnership. THE amount that came to the share of the father and his sons in the division of the business capital was credited in the account-books of the firm to the father and his sons respectively. THE firm was granted registration under Section 26-A of the Act for the assessment year 1956-57. THE registration was renewed for subsequent years.

(3.) THE assessee then filed appeals before the Tribunal. THE Tribunal took the view that as there was no obligation on any of the partners or the minor to contribute or maintain any capital in the firm, the amount of interest paid to the minor could not be considered as income arising to the minor from his admission to the benefits of the partnership and, therefore, the interest amount could not be included in the total income of the assessee-Badrilal for the relevant assessment years. THE Tribunal sought support for this conclusion in the decision of the Bombay High Court in Bhogilal Laherchand v. Commr. of Income Tax, Bombay City, 1954--25 ITR 523 : (AIR 1955 Bom 16) where interest earned by minors on deposits maintained in a partnership firm was held to be not a benefit which the minors received from their admission to the benefits of the partnership firm.