K. KRISHNAVENI V. APPELLATE ASST. COMMR. OF INCOME-TAX, C RANGE, MADRAS, AND ANOTHER

prior to the Taxation Laws (Amendment) Act, 1975, the income arising to a minor child from admission in the benefits of the partnership could be included in the partner's total income only if the parent (also) was a partner in the firm. But after the amendment of s. 64 in 1975, even if the parent is not a partner in the firm in which the minor child is admitted to the benefits of the partnership, the income arising therefrom to the minor child is includible in the parent's income.

Section 16(3) (a) (i) of the Act.  states that, in computing the total income of any individual for the purpose of assessment, so much of the income of a wife of such individual as arises directly or indirectly from the membership of the wife in a firm of which her husband is a partner, shall he included.

in present case both were directors of company . Wife income would be clubbed with husband income 

64. RECTIFICATION OF MISTAKES.

(1) The Registrar shall have power at all time to rectify any mistake in order to bring the entry in the Register of Firms relating to any firm into conformity with into documents relating to that firm filed under this Chapter.

(2) On application made by the all parties who have signed any document relating to a firm filed under this Chapter, the Registrar may rectify any mistake in such document or in the record of note thereof made in the Register of Firms.

Clubbing of income means Income of other person included in assessee’s total income, for example: Income of husband which is shown to be the income of his wife is clubbed in the income of Husband and is taxable in the hands of the husband. Under the Income Tax Act a person has to pay taxes on his income.

Normally, a person is taxed in respect of income earned by him only. However, in certain special cases income of other person is included (i.e. clubbed) in the taxable income of the taxpayer and in such a case he will be liable to pay tax in respect of his income (if any) as well as income of other person too. The situation in which income of other person is included in the income of the taxpayer is called as clubbing of income. E.g., Income of minor child is clubbed with the income of his/her parent. Section 60 to​ 64​ contains various provisions relating to clubbing of income.​

As per section 60​​, if a person transfers inco​me from an asset owned by him without transferring the asset from which the income is generated, then the income from such an asset is taxed in the hands of the transferor (i.e., person transferring the income)

Under certain circumstances as given in section 64(1)(ii), remuneration (i.e., salary) received by the spouse of an individual from a concern in which the individual is having substantial interest is clubbed with the income of the individual. Provisions in this regard are as follows:

• The individual is having substantial interest in a concern 
• Spouse of the individual is employed in the concern in which the individual is having substantial interest.
• The spouse of the individual is employed without any technical or professional knowledge or experience (i.e., remuneration is not justifiable).

You need to consult a local CA in this regard 

2) The partnership capital account is an equity account in the accounting records of a partnership. It contains the following types of transactions: ... Profits and losses earned by the business, and allocated to the partners based on the provisions of the partnershipagreement. Distributions to the partners.

3) A partnership capital account is an account in which all the transactions between the partners and the firm are to be recorded. With the preparation of the partnership capital account, it becomes easy to distribute the assets and liabilities to the partners and becomes easy to settle the account at the time of admission or retirement of partners.

4) 

part of the profit is retained in the business for its growth and continued successful existence. This is done by means of opening a Reserve Account. After the net profit for a particular year has been ascertained (i.e. after the Profit and Loss Account has been prepared), that portion of the net profit which is agreed to be retained in the business is:

• Debited to the Profit and Loss Appropriation Account, and
• Credited to the Reserve (or General Reserve) Account.

Reserves are the amount of profits, which is set aside until there is a need for money for some purpose.

This is called a as appropriation. The name of a reserve account indicates its purpose or use.

It can be said that reserve is an amount that appears on the liability side of the statement of financial position.

If the company credit entire profits to partner’s current accounts, the partners become entitled to withdraw it, in cash or kinds. This shows all earnings by the firm are related to partners.

Thus the company opens a Reserve Account in the books. After ascertaining the net profit for a particular year  (i.e. after the preparation of Profit and Loss Account), a  portion of the net profit which the partners agree to retain in the business is known as Reserves.

the capital account is usually fixed, while the current account is the current total of appropriations and the share of residual profit/loss, less drawings.

Remember that a partner's drawings will be a debit entry in the partner's current account.

A Partnership Capital Account is a distinct account that shows the equity in a partnership that is owned by specific partners.

As per the Indian Contract Act, 1872, minors cannot be a party to an agreement. An agreement involving a minor is void-ab-initio.

However, the Indian Partnership Act has its own sets of legal rules regarding minors.

In CIT v. Dwarkadas & Co, the Supreme Court held that a minor cannot become a full-fledged partner in an existing firm. The only concession that section 30 gives is that a minor may be admitted to the benefits of an existing firm. The Hon’ble judge then continued to observe:

“Section 30 of the Indian Partnership Act, clearly lays down that a minor cannot become a partner, though, with the consent of the adult partners, he may be admitted to the benefits of partnership. Any document which goes beyond this section cannot be regarded as valid for the purpose of registration.”

In S.C. Mandal v. Krishnadhan it was held that under S. 4 of the Partnership Act, a firm means a group of people who have entered into a contract of partnership among themselves and reading it with S. 11 of the Contract Act, it can be interpreted that a minor cannot be a part of the contracted partnership. A minor can only be admitted to the benefits of a partnership, and that partnership has to exist independently. Also, there cannot be a contract between two minors. In short, there should be a partnership between two major partners before a minor can be admitted to its benefits.

• A minor admitted to the benefits of a partnership has all the rights of a full partner.
• Such minor is entitled to his agreed shares of the property and of the profits of the firm.
• Such minor has the right to access and taking copies of the book of accounts of the firm. It follows that he has no right of access to those other books of the firm which do not contain matters of account.[Section 30(2)]
• Such minor is not personally liable to the third parties for the debts of the firm, but his liability is limited only up to his shares in the partnership assets and profits.

• Such minor cannot bring any suit against the partners for an account or payment of his share of the property or profits of the firm unless he first serves his connection with the firm.[Section 30(4)]
• Such minor is not entitled to take part in the conducting of the business as he has no representative capacity to bind the firm.
• Where the minor becomes a partner by his own choice or by failure to give within the specified time i.e. six months after attaining the age of majority, he becomes personally liable to the third parties for all the debts of the firm retrospectively from the date of his admission to the benefits of partnership.

• If after attaining the age of majority but before choosing to become a partner the minor represent and knowingly permits himself to be represented as a partner in the firm, he will be personally liable to anyone who on the faith of such representation granted credit to the firm on the ground of ‘holding out’.

This account typically exists as an item that is shown in a business's financial and accounting records rather than as an actual bank account, although this depends on business practices.