Case: Commissioner of Income Tax, Assam, Tripura and Manipur Vs. Jwalaprasad Agarwala

had been assessed in the hands of the father, on the ground that the father had taken active interest in the business of the firms in which the minor is a partner. Apart from this, the fact remains that the minor had been admitted as a partner in Jwalaprasad Mulchand, Dhubri, only because of the introduction of the initial capital of Rs. 74, 721 in his name by his father. So far as the other two firms are concerned, it is apparent that these are allied concerns and there must be intimate financial connection subsisting between them and Messrs. Jwalaprasad Mulchand, Dhubri, because otherwise there could have been no earthly reason why the minor should be admitted to the benefits of partnership in respect of Jwalaprasad Mulchand (Galla Dept.), Dhubri, and the Calcutta firm. Thus, in spite of the fact that each of these firms are paying interest to the minor, we are obliged to hold that the share incomes which the minor had been deriving from each of these firms is directly attributable to the introduction of the original capital of Rs. 74, 721 out of the gift which the appellant had given to his minor son. In view of this, the provisions of section 16(3)(a)(iv) are clearly applicable both in respect of the interest on the original capital sum of Rs. 74, 721 and the share incomes of the minor as derived from the above-mentioned three firms."The Tribunal, however, excluded the interest on the other accretions to the capital account of the minor as appearing in the three firms accounts from the assessment of the appellant4. The High Court, on a reference, answered the questions in favour of the assessee. The Commissioner of Income-tax obtained special leave from this court and the appeal is now before us5. The High Court first dealt with the income of the minor from the Galla firm and the Calcutta firm. The High Court held that " 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." We agree with this finding. The reasons given by the Tribunal for including the income from these two firms were that the three concerns were allied concerns and there must be intimate financial connection subsisting between them and further that there could have been no earthly reason why the minor should be admitted to the benefits of partnership in respect of Galla department and the Calcutta firm. In our view, these reasons are not cogent to come to a finding that the profits from these two firms were directly attributable to the investment of Rs. 74, 721 in the Dhubri firm. The High Court rightly rejected the contention of the counsel for the department that the sum of Rs. 11, 000 which was admitted to have been transferred from the accounts of the Dhubri firm to the Calcutta firm must be presumed to have been contributed by the minor out of the assets transferred to him and invested in the Dhubri firm. The High Court rightly held that there was no finding of the Tribunal that this sum of Rs. 11, 000 was part of the original capital of Rs. 74, 721 transferred to the minor by the fatherComing to the Dhubri firm, the High Court held that the Tribunal had relied on two circumstances in support of its finding that the share of the minor in the Dhubri firm was his income arising out of the transfer of assets of the father, the assessee. The first circumstance taken by the Tribunal was that the past record of the assessee showed that this objection had never been raised before. We agree with the High Court that this circumstance is not evidence of the fact that the minors share of profits in the Dhubri firm arose out of the assets transferred by the father. It seems to us that this circumstance is wholly irrelevant for determining this point. The second circumstance relied upon by the Tribunal was that the minor had been admitted as a partner in the Dhubri firm only because of introduction of initial capital of Rs. 74, 721. We agree with the High Court that there is no evidence on record to justify a finding that the minor had been admitted as a partner in the firm. Jwalaprasad Mulchand, Dhubri, only because of the introduction of the initial capital of Rs. 74, 721 in his name by the father, the assessee. The High Court observed that " from the account books it appears that Rs. 74, 721 were taken as the minors deposit in the account books and, further, that the minor was admitted to the benefits of the partnership. There is no evidence to show that he was admitted to the benefits of the partnership because he had undertaken to deposit the sum of Rs. 74, 721 given to him by his father in the firm. " We agree with these observations6. But Mr. S. T. Desai, the learned counsel for the appellant, complains that there could be no evidence on the record because this point was not raised before the Income-tax Officer and the assessee had been accepting the past assessments. We find, however, that the point was raised before the Appellate Assistant Commissioner, and if the department was so minded, evidence could have been led before the Appellate Assistant Commissioner, and even before the Appellate Tribunal after obtaining its permissionMr. Desai further urged that the High Court had not considered the question that the share of profit arose indirectly from the gift. We see no force in this contention because the High Court has considered the question from all aspects

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]5. The High Court first dealt with the income of the minor from the Galla firm and the Calcutta firm. The High Court held that " 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." We agree with thisour view, these reasons are not cogent to come to a finding that the profits from these two firms were directly attributable to the investment of Rs. 74, 721 in the Dhubri firm. The High Court rightly rejected the contention of the counsel for the department that the sum of Rs. 11, 000 which was admitted to have been transferred from the accounts of the Dhubri firm to the Calcutta firm must be presumed to have been contributed by the minor out of the assets transferred to him and invested in the Dhubri firm. The High Court rightly held that there was no finding of the Tribunal that this sum of Rs. 11, 000 was part of the original capital of Rs. 74, 721 transferred to the minor by the fatherComing to the Dhubri firm, the High Court held that the Tribunal had relied on two circumstances in support of its finding that the share of the minor in the Dhubri firm was his income arising out of the transfer of assets of the father, thefirst circumstance taken by the Tribunal was that the past record of the assessee showed that this objection had never been raised before. We agree with the High Court that this circumstance is not evidence of the fact that the minors share of profits in the Dhubri firm arose out of the assets transferred by the father. It seems to us that this circumstance is wholly irrelevant for determining this point. The second circumstance relied upon by the Tribunal was that the minor had been admitted as a partner in the Dhubri firm only because of introduction of initial capital of Rs. 74, 721. We agree with the High Court that there is no evidence on record to justify a finding that the minor had been admitted as a partner in the firm. Jwalaprasad Mulchand, Dhubri, only because of the introduction of the initial capital of Rs. 74, 721 in his name by the father, the assessee. The High Court observed that " from the account books it appears that Rs. 74, 721 were taken as the minors deposit in the account books and, further, that the minor was admitted to the benefits of the partnership. There is no evidence to show that he was admitted to the benefits of the partnership because he had undertaken to deposit the sum of Rs. 74, 721 given to him by his father in the firm. " We agree with thesefind, however, that the point was raised before the Appellate Assistant Commissioner, and if the department was so minded, evidence could have been led before the Appellate Assistant Commissioner, and even before the Appellate Tribunal after obtaining its permissionMr. Desai further urged that the High Court had not considered the question that the share of profit arose indirectly from the gift. We see no force in this contention because the High Court has considered the question from all aspects