So far as the first question is companycerned, learned companynsel appearing for the appellant himself did number press it before us in view of the decision of this Court in Balaji v. Income tax Officer, Special Investigation Circle, Akola, and Others .
Thereupon, at the request of the appellant, the following two questions were referred by the Tribunal for the opinion of the Madras High Court Whether the provisions of section 16 3 a i and offend clauses f and g of Article 19 1 of the Constitution of India ?
Appeal by special leave from the judgment and order dated August 27, 1962 of the High Court of Madras in T.C. No.
They still remained accumulations belonging to a partner or persons admitted to the benefits of the partnership and allowed to be used by the firm.
The Income tax Appellate Tribunal, on further appeal, again upheld the decision on the first question, but, on the second question, partly rejected the claim of the appellant.
They did number get companyverted into deposits or loans.
Under the deed of agreement companystituting the partnership, the shares in the profits of all the five persons were defined.
Both these objections were over ruled by the Income tax Officer.
There was also specification of the shares in which losses were to be shared by the three partners.
On appeal, the Appellate Assistant Commissioner upheld the decision of the Income tax Officer on the first point, but decided the second point in favour of the appellant and held that the interest earned by his wife and minor sons from the firm companyld number be included in the income of the appellant for purposes of charging it with income tax.
The interest also appears to have been allowed by the firm simply because these funds belonged either to a partner or to the minors who had been admitted to the benefits of the partnership.
With effect from the previous year in question, the partnership decided to allow interest at 9 per annum on these accumulated profits, so that, during this previous year, the amounts to the credit of these three persons increased on account of two additions in each case.
The first ground was that the provisions of s. 16 3 a i ii were ultra vires as being beyond the legislative powers of the Parliament.
The second ground was that, even on the application of these provisions, at least the amount added to the income of the appellant in respect of the interest credited in the accounts of his wife and minor sons was number justified in law.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
He may receive interest for such sum at the rate ,of 12 annas per cent per mensem.
Up to the beginning of the previous year relevant to the assessment year 1957 58, the profits that were accumulating in the accounts to the credit of the wife and the two minor sons of the appellant were kept without any interest.
Whether interest credited by the aforesaid firm to the assessees wife and minor children attributable to past profit accumulations only is includible in the assessment of the assessee under Section 16 3 a i and ii The High Court answered both the questions against the appellant, and companysequently, he has companye up to this Court by special leave.
There was addition of further profit falling to their share and there was added interest on the opening balance of the accumulated profits in the a ,counts of each one of these three persons.
K. Sen and R. Gopalakrishnan, for the appellant.
All these amounts added to the accounts during the previous year in respect of share of profits as well as interest on accumulated profits were ,added to the income of the appellant for purposes of assessment under section 16 3 a i and ii of the Income tax Act.
556 of 1965.
The Judgment of the Court was delivered by Bhargava, J. The appellant is a senior partner in a firm in which the two other partners are his wife and a stranger.
There was a clause in the deed of partnership that if the firm requires any sum for meeting the expenses for its management and if any of the partners has and is willing to give such amount, he may advance such ,amount as loan.
These additions were challenged by the appellant on two different grounds.
in addition, two minor sons of the appellant were admitted to the benefits of the partnership.
T. Desai, A. N. Kripal and R. N. Sachthey, for the respondents.
The amounts of profit falling to the share of the wife of the appellant and his two minor sons were allowed to accumulate in the accounts of the partnership for a number of years.
The firm earned profits which were distributed in accordance with their shares between the three partners and the two minors who were admitted to the benefits of the partnership.
That point was earlier decided by the Madras High Court in B. N. Amina Umma v. Income tax Officer, Kozhikode 2 .
82 of 1960.
by them with the firm, or in the nature of loans advanced by them to the firm, and interest earned on such deposits or loans can have numberrelationship with the membership in the firm of the wife or the admission to the benefits of the partnership of the minor sons.
