Sabyasachi Mukharji, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, the following question has been referred to this court: "Whether, on the facts and in the circumstances of the case, the share of the profit of assessee's wife was includible in the total income of the assessee under Section 64(iii) of the Income-tax Act, 1961 ?"
(2.) The assessee is an individual. The reference arises in respect of the assessment year 1962-63 for which the accounting year is 2018 R.N. corresponding to the period 26th March, 1961, to 13th April, 1962. The assessee had been and at the material time also was a partner in a firm called M/s. Ramesh & Co. In this firm the assessee had 8 annas share and the balance was shared by three other partners, Kunjilal, assessee's father, Hariram, assessee's brother, and one Jagdish Prosad, a stranger. From his account with the said firm the assessee made two gifts to his wife, Kaushalya Debi, Rs. 21,000 on 10th November, 1960, and Rs. 30,000 on the 28th November, 1960. The assessee also made a gift of Rs. 11,000 to his mother, Smt. Chilli Bai, on 28th November, 1960, by similarly drawing from his account with the firm.
(3.) Smt. Chilli Bai also received another gift of Rs. 20,000 from her husband, the said Kunjilal, which was also made by him similarly drawing from his account with the firm. The assessee's wife, Smt. Kaushalya Debi, as well as Smt. Chilli Bai, assessee's mother, became partners with three others in the newly constituted firm of M/s. Kunjilal Hariram & Co. The five partners of the firm were: Moharilal Agarwala, assessee's father, Hariram Agarwala, assessee's brother, who was also a partner with the assessee in the firm of M/s. Ramesh & Co., Chilli Bai, assessee's mother, Smt. Kaushalya Debi, assessee's wife, and Jagdish Prosad Gupta, a stranger. The partnership deed provided that the business was to commence from 12th November, 1960, and the said deed was drawn up on 10th November, 1960. The preamble to the deed stated as follows: "Whereas the partner of the first part (Jagdish Prosad Gupta) who has extensive and outstanding talent of organisation in jagree and grains trade but little finance requested the partners of the first four parts to enter into co-partnership with him on contributing the necessary finance to carry on business in jagree and grains and also act as commission agents in jagree, grains and allied commodities to which request they acceded.";