JWALA PRASAD AGARWALA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following questions of law have been referred to this court for opinion under section 66(2) of the Indian Income-tax Act, 1922, by the Income-tax Appellate Tribunal, Calcutta Bench "A :

(2.) THE assessment year is 1959-60, the corresponding previous years being 2014-15 R.J. Year, 2014-15 Dewali year and 2015 Ram Navami. THE assessee, Jwalaprasad Agarwala, was partners in Messrs. Onkarmal Jwalaprasad. As disclosed in the books of account he divided the balance of his capital account in four equal parts and made a gift of a sum of Rs. 74,721 to each of his four minor sons in July, 1953. Three of his sons have attained majority but the fourth son, Parmeshwar Agarwala, was a minor during the relevant accounting year. He was admitted to the benefits of the partnership in three firms known is (1) Jwalaprasad Mulchand, Dhubri (Assam). (2) Jwalaprasad Mulchand (Galla department), Dubri (Assam) and (3) Jwalaprasad Mulchand, Calcutta. THE amount which is gifted by the father to the minor, Parmeshwar Agarwala, is found to have been invested in the firm of Jwalaprasad Mulchand, Dhubri. THE other fact referred to in the statement of the case is that a sum of Rs. 11,000 out of the credit appearing in the personal account of Parmeshwar Agarwala in the account books of Jwalaprasad Mulchand, Dhubri, is transferred to the firm of Jwalaprasad Mulchand, Calcutta, during the previous year for the 1957-58 assessment year. In the firm of Jwalaprasad Mulchand (Galla department), Dhubri, no money of the minor has been invested. THE shares of profit which the minor derived from the above three firms were included in the income of the father, Jwalaprasad Agarwala, under section 16(3)(a)(iv) of the Indian Income-tax Act, 1922.

(3.) SO far as the two firms, namely, Jwalaprasad Mulchand (Galla department, Dhubri) and Jwalaprasad Mulchand, Calcutta, are concerned, there is neither any finding by the Tribunal that the minor contributed any money towards the capital of these firms out of the sum of Rs. 74,721, the amount of money transferred to the minor by his father, the assessee, not is there any material for coming to such a finding. The Tribunal has held that the minors share of profits in these two firms will be included in the income of the father, only on the ground that the three firms are allied firms and there must be an intimate financial connection subsisting between these firms and Messrs. Jwalaprasad Mulchand, Dhubri. What would be the extent of the financial connection between the two and whether any money out of the sum Rs. 74,721 transferred to the minor was contributed by the minor towards the capital of the Calcutta and Galla firms cannot be determined by the material on the record. Thus, merely because the minor was admitted to the benefits of these two firms and as there must be some sort of financial connection between the three firms, it cannot be said that the minors share of profit in these two firms is the benefit directly arising or indirectly arising to the minor from the assets transferred by the assessee to him. Section 16(3)(a)(iv) will thus not be attracted in this case.