H.N. Seth, J.
1. This is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the assessee, Sri Kaladhar Prasad Chaturvedi. The Income-tax Appellate Tribunal, Allahabad, has referred the following question for the opinion of this court:
'Whether, on the facts and circumstances of the case, the amount of interest standing to the credit of each minor son of the assessee in the said firm was rightly included in the Income of the assessee under Section 64 of the Income-tax Act, 1961 ?'
The facts giving rise to this reference are that the assessee, Kaladhar Prasad, is a partner in a firm known as Messrs. Kaladhar Prasad and Sons and his three minor sons, namely, Rakesh Kumar, UpdeshKumar and Lokesh Kumar, were admitted to its benefits. While making assessment for the year 1962-63, the Income-tax Officer included in the assessee's income, the share of profit of minor partners in the firm amounting to Rs. 4,736. This amount included an amount of Rs. 1,627 credited to the account of the minors as interest. In appeal the assessee did not object to the inclusion of the share income of the three minors, in the total income of the assessee, but submitted that the interest paid to the three minors should not have been included in his income. The plea raised by the assessee was rejected by the Appellate Assistant Commissioner. He went up in appeal before the Income-tax Appellate Tribunal, which dismissed the appeal holding that the interest earned by the three minors on the amount standing to their credit in the books of the firm had been rightly included in the income of the assessee under Section 64 of the Indian Income-tax Act;
2. Originally, there was a joint family business which was being run in the name of Messrs. Kaladhar Prasad and Sons. On 20th October, 1958,the family business was converted into partnership business and the three minor sons of Kaladhar Prasad were admitted to its benefit. At the time of partition of the family business, each of the minors got a sum of Rs. 19,966 which was credited to their accounts in the books of the firm.
3. At the time of constitution of the firm, a partnership deed was executed by the assessee, Kaladhar Prasad Chaturvedl, and his major son, Mahesh Prasad Chaturvedi. In this deed, after reciting circumstances in which disruption of the family business took place, it was mentioned that the parties decided to continue the joint family business as a partnership business. Clause (4) of the deed provided that the capital necessary for the purposes of the business was to be supplied by the partners alone, i.e., by Kaladhar Prasad Chaturvedi and Mahesh Prasad Chaturvedi. The minors were not liable to provide any capital. The money credited in the names of the partners was to be deemed to be capital of the business and money credited in the names of the minors was to be their deposit with the firm. On such capital or deposits of the partners or minors, interest at the rate of 6% was payable by the firm. The deed further recited that the three minors who had been admitted to the benefits of the firm were to get one anna share in the profits of the firm. It was in pursuance of the agreement between the parties that the accounts of the minors were credited with certain amount of profits and interest on credits outstanding in their names earned by the minors during the relevant year.
4. The Income-tax Appellate Tribunal came to the conclusion that the amount originally credited to the share of the three minors in the account books of the firm, represented the assets contributed by them in the partnership business. According to it, this conclusion was supported by the fact that the amount allotted to the minors on partition formed part of the capital of the family business. Immediately after partition the family business was converted into partnership business and the same capital was utilised for running it. Since the original nature of the amount was that of capital, it continued to be the same even after it was utilised in the partnership business. It also observed that, generally, minors are admitted to the benefits of the partnership either because they do some work for the partnership or because they bring in some capital. It noticed that, in the books of the firm, same treatment was given to the amounts standing in the name of the minors, as was given to the amounts standing in the names of adult partners. From these facts the Tribunal inferred that there was an obligation on the part of both the adults and the minors to keep the money in the said firm. As in its opinion, the minors were obliged to keep the money deposited in the firm, the Tribunal inferred that the interest was earned by the minors on the amount outstanding in their names, directly or indirectly, in their capacity as partners admitted to the benefits of the firm within the meaning of Section 64 of the Income-tax Act. In its opinion, the facts of the present case are distinguishable from the facts of the case of Bhogilal Laherchand v. Commissioner of Income-tax,  25 I.T.R.523 (Bom) and are akin to those of Ghouthmal Kejriwal v. Commissioner of Income-tax,  41 I.T.R. 570 (Assam)
5. The two cases, Bhogilal Laherchand and Chouthmal Kejriwal were noticed by the Supreme Court in the case of S. Srtnivasan v. Commissioner of Income-tax,  63 I.T.R.273,  I.S.C.R. 727 (S.C.)? In that case a question arose whether interest paid to a minor on accumulated profits was earned by him directly or indirectly by his admission to the benefits of the partnership firm. While discussing the question involved fn that case, the learned judges distinguished the case of Bhogilal Laherchand on the ground that the facts of that case were not applicable to the case before them as the interest accruing to the wife and minor sons of the appellant was not the result of any deposit made by them with the firm. The decision implied 'that in case the circumstances of a case justified the conclusion that interest was earned by a minor on the deposit made by him, the same could not be included in the income of the father under Section 64. Observations made in this case show that it was open to the parties to agree to treat the accumulated profits as loan.
6. Answer to the question, whether the amount standing in the name of a minor admitted to the bedefits of a firm is to be treated as capital contributed by him or as deposit or advance, therefore, depends primarily upon the intention with which it is introduced in the business. Learned counsel for the revenue urged that, in the present case, to begin with, the amount credited in the account of the minor came out of capital of the family business. This amount was taken over by the partnership firm at the time of commencement of the business and was used in the same manner in which it was being used before. Further, the minors' account was treated in the same manner in which the account of adult partners was treated. He contended that generally minors are admitted to the benefits of a firm either because they do some work for it or because they bring income capital. There is nothing on the record of this case to indicate that the minors were admitted to the benefits of the firm for doing its work. According to him, all these circumstances indicate that the amount standing in the name of the minor was the capital contributed by him.
7. So far as the circumstance that the account standing in the name of a minor was treated in the same manner in which the account standing to the credit of the adult partners was treated is concerned, we find that the only treatment meted out to the account standing to the credit of theminors was that the share of profits earned by them from business as also the interest on the credits standing in their names were added to their account from time to time. Such treatment of the account by itself does not provide any basis for determining whether the original credit in the name of a minor represented the capital contributed by him. Such treatment is equally consistent with the minor depositing with the firm, the amount received by him on partition of the family business'
8. The argument that, generally, minors are admitted to the benefits of a firm either because they work for the firm or because they contribute capital and, therefore, in a case where it is found that minors do not work for the firm, it should be inferred that the amounts standing to their credit represents the capital contributed by him does not appeal to us. There can be several other reasons why minors are admitted to the benefits of a firm and, at times, even gratuitously.
9. Clause (4) of the partnership deed runs as follows :
'The capital necessary for the purpose of the business shall be supplied by the partners hereunto alone and the minors shall not be liable to invest any capital. Money credited in the names of the partners so far or hereafter shall be deemed to be capital of the business and any money credited in the names of the minors so far or hereafter shall be deemed to be their deposits in the firm ....'
These recietals are quite clear and unequivocal ; they indicate that thepartners took pains to clarify that whatever might have been the positionof the credit standing in the names of the minors, these credits were not tobe treated as their capital contribution. Under the partnership deed theminors were not required to contribute any capital. The circumstancespointed out by learned counsel for the revenue are quite consistent withthe position that the amount standing to the credit of the minors were inthe nature of their deposits. They do not detract from the clear intentionof the parties as indicated in the partnership deed. Whatever may havebeen the position, had there been no such clear recital about the intentionof the partners in the partnership deed, the circumstances pointed out bythe learned counsel for the revenue neither singly nor cumulatively showthat the amount standing to the credit of the revenue was introduced inthe firm as capital and not as deposit by the minors. There is absolutelyno reason to conclude that Clause (4) of the partnership deed did not represent the real intention of the parties. It is, the therefore, clear thatthe amount standing to the credit of each individual minor was introducedin the firm as deposit and not as their capital contribution.
10. We are, therefore, of opinion that the interest credited to the accounts of the minors on the amounts standing in their names in the books of thefirm could not be added to the income of the assessee under Section 64 of the Income-tax Act, 1961.
11. In the result we answer the question referred in the negative and against the department. The Commissioner of Income-tax will pay a sum of Rs. 200 as costs of this reference to the assessee. Counsel's fee is assessed at the same figure.