(1.)This appeal, by the Revenue, is directed against the judgment of the Division Bench of the High Court of Gujarat in Income-tax Reference No. 191 of 1980 dated 29th October, 1993 (Sunil J. Kinariwala v. Commissioner of Income-tax, reported in (1995) 211 ITR 127)).
(2.)At the instance of the Revenue, the Income-tax Appellate Tribunal (for short, 'the Tribunal') referred the following questions, under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), for the opinion of the High Court :
"(1) Whether, on the facts and in the circumstances of the case, 50 per cent. out of the assessee's ten per cent, right, title and interest in the partnership firm of Messrs. Kinariwala R.J.K. Industries belongs to Sunil Jivanlal Kinariwala Trust and the income arising therefrom belongs to the said trust by overriding title
(2) Whether, on the facts and in the circumstances of the case, the sum of Rs. 20,141 being the profits referable to 50 per cent, out of the assessee's right, title and interest of ten per cent, in the partnership firm of Messrs. Kinariwala R.J.K. Industries is not the real income of the assessee, but of Sunil Jivanlal Kinariwala Trust and as such assessable only in the hands of the trust
(3) Whether, on the facts and in the circumstances of the case, fifty per cent, out of the assessee's ten per cent, share in the firm of Messrs. Kinariwala R.J.K. Industries has been validly assigned to Sunil Jivanlal Kinariwala Trust under the deed of trust dated December 27, 1973, and whether the income arising therefrom belongs to the said trust by way of overriding title -
(3.)The facts which gave rise to these questions may be noticed here.
The assessee, a partner in the partnership firm, known as 'M/s. Kinariwala R.J.K. Industries', Ahmedabad (for short, 'the firm'), was having ten per cent share therein. On December 27, 1973, he created a Trust named "Sunil Jivanlal Kinariwala Trust" by a deed of settlement assigning fifty per cent out of his ten per cent right, title and interest (excluding capital), as a partner in the firm, and a sum of Rupees five thousand out of his capital in the firm in favour of the said Trust. There are three beneficiaries of the Trust - the assessee's brother's wife, assessee's niece and the assessee's mother. In the Assessment Year 1974-75, he claimed that as fifty per cent of the income attributable to his share from the firm, stood transferred to the Trust resulting in diversion of income at source, the same could not be included in his total income for the purpose of his assessment. The Income-tax Officer rejected the claim on the view that it was a case of application of income and not diversion of income at source; he also found that Section 60 of the Act was attracted as only income without transfer of asset was settled. Against the order of assessment, the assessee appealed before the Appellate Assistant Commissioner of Income-tax who allowed the appeal directing that a sum of Rs. 20,141/- which stood transferred to the trust under the settlement, be excluded from the total income of the assessee. However, on appeal by the Revenue, the Tribunal reversed the order of the Appellate Assistant Commissioner. Thus, the aforementioned questions of law came to be referred to the High Court by the Tribunal.