Pathak, C. J. - (1.) The appellant is an assessee who derives income from various sources, including income from the Shrimati Arundhati Balkrishna Trust, Ahmedabad. In assessment proceedings for the assessment year 1964-65 the Income-tax Officer found that a sum of Rs. 10,880/- had been debited to the interest account maintained in the books of the Ahmedabad trust as interest paid to the Harivallabhadas Kalidas Estate Account. Upon further scrutiny, he discovered that substantial debits totalling Rs. 2,19,804/- included withdrawals from the Estate Account by the Ahmedabad trust on account of the personal expenses of the assessee. After taking into consideration earlier withdrawals from the Estate Account by the Ahmedabad Trust for the purpose of investment and making adjustments for deposits during the year, the Income-tax Officer concluded that the net withdrawals from the Estate Account for personal expenditure were Rs. 3,10,806/-. He held that the proportionate interest of Rs. 6,199/- out of the total interest of Rs. 10,880/- paid by the Ahmedabad Trust to the Estate Account was referable to such withdrawals, and therefore constituted an inadmissible deduction. Similarly, for the assessment year 1966-67 the Income-tax Officer found that a sum of Rs. 25,496/- had been shown in the books of account of the Ahmedabad trust for the relevant previous year as interest paid to the Estate Account. He held that of this sum, an amount of Rs. 12,833/- was referable to withdrawals for purposes other than investment, and accordingly he disallowed the claim of interest to that extent.
(2.) The assessee appealed to the Appellate Assistant Commissioner of Income-tax, and failing there she proceeded in second appeal to the Income-tax Appellate Tribunal, claiming that the entire amount of interest should have been allowed as a deduction for each year. An additional question raised in respect of the assessment year 1964-65 related to the point whether the assessee was liable to tax on the net income only received by her from the Trust or the income determined in accordance with the provisions of the Income Tax Act in the case of the Trust. The Appellate Tribunal dismissed the appeals of the assessee.
(3.) At the instance of the assessee the Appellate Tribunal referred the following questions of law to the High Court of Gujarat in respect of the assessment year 1964-65: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in not holding that out of the interest payment of Rs. 10.880/-, Rs. 6,199/- was not an admissible deduction against the income from other sources (2) Whether, on the facts and in the circumstances of the case, the income includible in the total income of the assessee is income determinable as per provisions of the Income Tax Act, 1961 in the case of the Trust or the income receivable by the assessee from the said trust -;