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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.

(ii) from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner;
(iii) from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart; or
(iv) from assets transferred directly or indirectly to the minor child, not being a married daughter, by such individual otherwise then for adequate consideration."

Admittedly, the assessee father is not partner in any of these firms and thus section 16(3)(a)(ii) will not apply. The department claimed that under section 16(3)(a)(iv) the share of the profit of the minor in the three firms is liable to be included in the income of the father. The share of the profit of the minor in these three firms is the income which is derived from the assets transferred to the minor, Parameshwar Agarwala, without any consideration. The Tribunal has found 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 firms are concerned, the finding is that it is apparent that these are allied concerns and there must be intimate financial connection subsisting between them and èMessrs. Jwalaprasad Mulchand, Dhubri, and the Calcutta firm Thus, in spite of the fact that each of these firms is paying interest to the minor, the Tribunal held 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 which the assessee had given to his minor son and thus in the opinion of the Tribunal the provisions of section 16(3)(a)(iv) were applicable both in respect of the interest on the original capital sum Rs. 74,721 and the share incomes of the minor as derived from the above-mentioned three firms.

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.

The next question which arises for consideration is how far the share of the minor in the partnership business of Jwalaprasad Mulchand, Dhubri, to the benefits of which he was admitted, will be included in the income of the father, the assessee.

The Tribunal has relied upon two circumstances in support of its finding that the share of the minor in the firm of Jwalaprasad Mulchand, Dhuri, was his income arising out of the transfer of the assets of the father, the assessee. The first circumstance is that the past record of the assessee shows that this objection was never raised before. On the other hand, in connection with the assessment for 1953-54, the assessee had claimed before the Tribunal that earned income allowance be granted by the department in respect of the share incomes of the minor had been assessed in the hands of the father. The second circumstance is 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. As regards the first circumstance pointed out by the Tribunal, the failure of the assessee to raise the said objection in the earlier proceedings does not debar him from raising the point that the minors share of profits in the said firm cannot be regarded as the income of the assessee. This circumstance can also not be regarded as evidence of the fact that the minors share of profit in the firm arose out of the assets transferred by the father. The claim of the assessee in the assessment year 1953-54 that he should be granted earned income allowance in respect of the share incomes of the minor, does not also debar the assessee from contending that the share of the minor in the business cannot be regarded as his income under section 16(3). The decision by the Income-tax Tribunal does not constitute res judicata. Regarding the second circumstance relied upon by the Tribunal there is no evidence on the record to justify a finding 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. 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. In the absence of any such connection between the deposit and the admission of the minor to the benefits of the firm, it cannot be said that the minors share of profit in the firm of Jwalaprasad Mulchand, Dhuri, arose out of the assets transferred to him by the assessee. As observed by èChagla C.J. in the case of Bhogilal Laherchand v. Commissioner of Income-tax section 16(3) of the Income-tax Act deals with notional or artificial income and it makes an assessee pay tax on income which in fact not his own, but which is notionally made to be his income, and therefore section 16(3) must be very strictly construed, and it is only if a particular income comes within the strict ambit of section 16(3) that the assessee can be made liable to pay tax on that income.