G.T.NANAVATI,J. - (1.) THIS reference is made by the Tribunal at the instance of the assessee. The following two questions are referred under S. 256(1) of the IT Act, 1961, to this Court for its opinion : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the gift of the part of share of profits and losses was not valid in law ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that there was no over riding title in favour of the donees under the gift deed"?
(2.) ASSESSEE Chanchalben was a partner of M/s Navjivan Trimming Factory. There were only two partners. It appears that she had contributed 50% capital and had also a share of 50% in the profits and losses of the firm. On 14th Oct., 1970, she gifted 40% share out of 50% share in the firm to her brother in law Shankerlal's seven grand sons and his daughter in law Kusumben Bharatkumar. It appears that Shankerlal had four sons, viz., Pushpavadan, Ramesh, Suresh and Bharat and to each branch the assessee wanted to give 10% share. Therefore, by the gift deed of that date, she gifted her 40% share in their favour as under : During the assessment proceedings for the year 1971 72, the assessee did not treat the income which was gifted to the donees as her income, and contended before the ITO that the share out of the profit, due to the said eight persons, was a charge on her income, and that it directly passed on to them and for that reason the said income was not to be regarded as her income. The ITO was of the view that in spite of the gift, this was a case of application of income by the assessee as the said amounts were paid to the donees out of the share of profit received by her.
(3.) THE appeal preferred by the assessee to the AAC was dismissed as the AAC was also of the same view. It may be stated that the assessee died after the said appeal was filed and thereafter the executor of her will, viz., Shankerbhai Kashibhai Patel was brought on record of the appeal.;