Arijit Pasayat, C.J.
1. In these two reference applications, the following questions have been referred by the Income-tax Appellate Tribunal, Delhi Bench-E (in short 'The Tribunal'), for the opinion of this court under Section 256(1) of the Income-tax Act, 1961 (in short 'the Act'), at the instance of the assessed so far as the first two questions are concerned, and at the instance of the Revenue so far as the third question is concerned :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that Section 64(1)(iii) of the Income-tax Act, 1961, as substituted by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976, was applicable to the case of the assessed ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the income arising to Shri Deepak Aggarwal in the firm of Rakesh Deep was otherwise includible to the total income of the assessed ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the interest on the accumulated profits which remained with the firm and which belonged to Shri Deepak Aggarwal, the assessed's minor son, could not be included in the total income of the assessed ?'
2. The dispute relates to the assessment year 1976-77 and the accounting period ended on November 1, 1975.
3. The factual position which is almost undisputed, is as follows : The assessed's minor son, Deepak Kumar Aggarwal, was admitted to the benefits of partnership in the firm known as Rakesh Deep. The said minor's share of profit included interest amounting to Rs. 14,975. The Income-tax Officer ('the ITO in short) included this amount in the assessment of the assessed although the assessed was not a partner of the aforesaid firm. It was noticed by the Income-tax Officer that the minor, Deepak Aggarwal, had invested Rs. 15,000 in the firm as his share of capital. When called upon to explain the source of the said amount, it was stated by the assessed that the minor got a gift of that amount from his uncle, Krishan Lal, and the gift had been accepted by the assessed as the natural guardian. Since the minor had received a gift from his uncle, it was submitted that the share of income from the firm could not be included in the income of the assessed, who was his father, particularly when he was not himself a partner of the firm. The Income-tax Officer did not accept the plea relying upon Section 64(1)(iii) of the Act as amended by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. The matter was carried in appeal by the assessed before the Appellate Assistant Commissioner (the 'AAC' in short). It was stated that neither the capital was advanced by the assessed nor was the assessed himself a partner in the firm in which the minor had been admitted to the benefits of partnership and, thereforee, Section 64(1)(iii) did not have any application. The Appellate Assistant Commissioner did not accept the plea. The matter was carried in further appeal before the Tribunal. The stand taken by the assessed before the Assessing Officer and the Appellate Assistant Commissioner was reiterated. Additionally, it was pointed out that the amended provision brought in by the Taxation Laws (Amendment) Act, 1975, could not have any application because the previous year of the firm ended before April 1, 1976. In any case, interest on the accumulated profits of the minor which remained with the firm could not be included in the assessed's total income. The Tribunal held that after April 1, 1976, it was immaterial whether any of the parents was a partner in the firm in which the minor was admitted to the benefits of partnership. It was observed that the inclusion as provided in Section 64(1)(iii) was dependant merely on the admission of the minor to the benefits of partnership and it was not necessary to find out for that purpose as to whether investment was made by the minor in the firm out of a gift or from any other individual source. A miscellaneous application was filed by the assessed to consider the question whether interest received by the minor on the accumulated profits standing to his credit in the books of the firm could be included in the assessment of the father. The Tribunal noticed that it had not considered the said aspect in the original order and held that the minor's income from interest on the accumulated profits could not be included in the assessment of the assessed.
4. Both the Revenue and the assessed moved for a reference of several questions. As indicated above, the Tribunal has referred in total three questions, i.e., two questions at the instance of the assessed and one at the instance of the Revenue.
5. We have heard learned counsel for the Revenue. There is no appearance on behalf of the assessed in spite of service of notice. Learned counsel for the Revenue pointed out that in view, of the clear language of Section 64(1)(iii) there is no scope for entertaining a doubt about the correctness of the view expressed by the Tribunal so far as the first two questions are concerned. So far as the third question is concerned reliance is placed on a decision of this court in CIT v. Ghewar Chand Kanuga : [1997]228ITR460(Delhi) .
6. In order to appreciate the stand taken by the Revenue it would be appropriate to quote Section 64(1)(iii) as it stood at the relevant point of time :
'64. (1) In computing the total income of any individual, there shall be included all such income as arises directly or indirectly--...
(iii) to a minor child of such individual from the admission of the minor to the benefits of partnership in a firm.'
7. It is to be noted that there is a material change in the provision as it stood prior to the amendment by the Taxation Laws (Amendment) Act, 1975, and the position as it stood subsequent to the amendment. On a perusal between the pre-amendment and post-amendment of the provisions of Section 64(1)(iii), the following position emerges :
Pre-1975 :
Where a minor was admitted to the benefits of the partnership in a firm his/her share of profits, etc., was includible in the total income of the parent if the latter was a partner in that firm.
Post-1975 :
Any income arising to a minor from the admission of the minor to the benefits of the partnership in a firm is in all cases includible in the total income of the parent, whether or not the parent is a partner in the firm.
8. thereforee, as rightly observed by the Tribunal the income becomes includible if a minor child is admitted to the benefits of partnership in a firm irrespective of whether the parent is a partner in the firm. The questions referred at the instance of the assessed have to be answered in the affirmative, in favor of the Revenue and against the assessed.
9. Coming to the question referred at the instance of the Revenue, it has to be noted that a similar question came up for consideration of this court in Ghewar Chand's case : [1997]228ITR460(Delhi) . In Radhey Shyam Dalmia v. CIT : [1992]195ITR667(Delhi) , this court had relied upon a decision of the Supreme Court in S. Srinivasan v. CIT : [1967]63ITR273(SC) , and held that if any income arises to the minor as a result of or in consequence of the partnership deed, whether it be in the form of share of profit, commission, fee or even interest, it would be assessable in the hands of the parent. But if there is an independent contract, de hors the partnership agreement whereby loan is advanced by the minor to the firm in which he has been admitted to the benefits of partnership, then the interest may not become liable to tax in the hands of the parent. The situation is entirely different here so far as the factual aspects are concerned. In our view the decision of this court referred to above and that of the Supreme Court in S. Srini-vasan's case : [1967]63ITR273(SC) , apply to the facts of the present case. The inevitable conclusion is that the Tribunal was not correct in holding that the interest on the accumulated profits, which remained with the firm in which the assessed's son was a partner could not be included in the total income of the assessed. thereforee, the answer to the question referred is in the negative, in favor of Revenue and against assessed. The references stand disposed of accordingly.