V.G.OAK, J. - (1.) THIS is a reference under S. 66(2) of the Indian IT Act, 1922, r/w S. 21 of the EPT Act (hereafter referred to as "the Act"). The assessee is a firm "Gur Bux Rai Har Bux Rai". The firm had two partners, Gur Bux Rai and Har Bux Rai, who owned equal shares. The chargeable accounting periods ended on 21st June, 1944, 10th July, 1945, and 31st March, 1946. Up to 14th July, 1942, the assessee -firm carried on business with head office at Kanpur and a branch at Farrukhabad. The Farrukhabad branch worked under the style "Pussulal Jangalal". There was partial partition in the family of one partner, Gur Bux Rai, on 14th July, 1942. The result of this partial partition was this. Whereas formerly Gur Bux Rai represented his joint Hindu family in the business, after 14th July, 1942, Gur Bux Rai was a partner in the Kanpur business in his individual capacity. As regards the branch business at Farrukhabad, his wife, Chameli Devi, and minor son, Gopal Das, were substituted for Gur Bux Rai. This partial partition was followed by complete partition on 1st June, 1943.
(2.) WHEN the EPTO took up assessments for the three chargeable accounting periods, he took the view that the main purpose of the partial partition was to avoid excess profits tax liability. He, therefore issued a notice to the assessee -firm calling upon it to show cause why necessary adjustment should not be made under S. 10A of the Act. The assessee replied that the partition in the family of Gur Bux Rai was genuine; and S. 10A could not be invoked. This objection was overruled by the EPTO. That decision was upheld in appeal by the Tribunal. The assessee -firm applied for a reference to the Court. Those applications were dismissed by the Tribunal. But upon applications under ss. 66(2) of the Indian IT Act, 1922, this Court directed the Tribunal to draw up a statement of the case and refer to this Court the question arising out of s. 10A of the Act. In parsuance of that direction, the following question has been referred to this Court by the Tribunal : " Whether, on the facts and circumstances of this case, the transaction in question was one which could be avoided under S. 10A of the EPT Act ?"
(3.) WHEN this reference camp up before this Court on 7th April, 1960, a Bench of this Court took the view that the question referred by the Tribunal did not arise out of the appellate decision of the Tribunal. On this view, the reference was returned unanswered. The assessee took up the matter in appeal before the Supreme Court. The assessee's appeal was allowed by the Supreme Court on Augnst 2, 1968. It was held that the question referred by the Tribunal did arise out of the appellate decision of the Tribunal. The case, was therefore, sent back to this Court for determination of the question, which was referred by the Tribunal. It is under these circumstances that this question has come up before us for disposal. We accordingly proceed to answer the question.;