NAGAPPA C R Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this reference under section 256(1) of the INcome-tax Act, 1961, relating to the assessment of the income of C. R. Nagappa of Bangalore for the assessment year 1962-63, the facts which from the basis for the questions referred are briefly the following :

(2.) IN dealing with the assessment for the year now under reference (1962-63), the INcome-tax Officer applied the above decision of this court and added the trust income used for the immediate benefit of the beneficiaries to the assessable income of the assessee and assessed the remaining income directed to be accumulated as income assessable in the hands of the beneficiaries. But while doing so, he appears to have overlooked the fact that the INcome-tax Act of 1961, which governed the assessment, had made a definite change while re-enacting the provisions of section 16 (3) (b) of the 1922 Act in section 64 (v) of the 1961 Act. The new provision, section 64 (v) of the 1961 Act, made it clear that the income arising out of transferred assets to be included in the total income from such transferred assets is for the immediate or deferred benefit of his spouse or minor children (not being a married daughter) or both. IN view of this obvious mistake, the Commissioner of INcome-tax, acting under section 263 of the Act of 1961, cancelled the assessment and directed the INcome-tax Officer to make a fresh assessment by including in the total income of the assessee the deferred benefit accruing to the beneficiaries under the relevant trusts.

(3.) THE contentions of the assessee were rejected by the Appellate Tribunal and, at his instance, the Tribunal has now referred to this court the following two questions of law :