B.S.DHILLON J. - (1.) THIS common judgment will dispose of Income-tax References Nos. 54 and 55 of 1974. The said references have been made at the instance of the Commissioner of Income-tax, Patiala, by the Income-tax Appellate Tribunal, Amritsar.
(2.) THE brief facts giving rise to the references are that the assessee, Shri Dilbagh Rai, is an individual. His original assessment for the assessment year 1965-66, relevant to the accounting period ending on March 31, 1965, was completed on November 16, 1967. This assessment was reopened under the provisions of Section 147 of the I. T. Act, 1961, to include his share income from the firm known as "messrs. Union Import and Export Corporation, Amritsar". The assessee contended that he became a partner of the said firm on August 14, 1963, that his share in the profits and losses of the firm was 8 naye paise in a rupee and that he threw his share in the partnership in the common hotchpotch of HUF, consisting of himself, his two minor sons and his wife by making a written declaration on September 5, 1963. It was thus claimed by the assessee that the share income from the firm of Messrs. Union Import and Export Corporation, Amritsar, belonged to his HUF and as such the same could not be included in his personal assessment. The plea of the assessee was not accepted by the ITO. The ITO came to the conclusion that the assessee had not invested any capital in the firm and that he being merely a working partner could not make a gift of his share in the firm to the HUF. Consequently, the ITO included the share income of Rs. 41,341 in the assessment of thejassessee for the assessment year 1965-66. Similarly, the ITO included a sum of Rs. 9,780 being the share income from the firm of Messrs. Union Import and Export Corporation, Amritsar, in the income of the assessee for the assessment year 1966-67. The assessee's appeal before the AAC was dismissed. The AAC recorded a finding that there was no nucleus of the HUF on September 5, 1963, and thus the question of throwing any property in the common hotchpotch of the family could not arise. He also observed that the assessee was merely a working partner in the firm of Messrs. Union Import and Export Corporation without investment of any capital and that his share in the profits and losses of the firm was in lieu of his contribution of manual and mental work and as such this share could not be legally transferred to the HUF. He observed that the business of the said firm could result in losses and thus the assessee could not by making the declaration in question burden the HUF with losses.
(3.) ON second appeal, the Tribunal accepted the plea of the assessee and deleted the additions of Rs. 41,341 and Rs. 9,780 from the income of the assessee for the assessment years 1965-66 and 1966-67. The two references in question have been made by the Income-tax Appellate Tribunal, Amritsar, at the instance of the revenue pertaining to assessment for the assessment years 1965-66 and 1966-67 for soliciting the opinion of this court on the following question of law: "whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal has rightly deleted the additions of Rs. 41,341 and Rs. 9,780 from the income of the assessee for the assessment years 1965-66 and 1966-67 ?";