COMMISSIONER OF INCOME TAX Vs. M D VEERANARASIMHAIAH

JUDGEMENT

(1.) The Income-Tax Appellate Tribunal, Bangalore Bench, Bangalore, has referred at the instance of the Department, the following question under Section 256(1) of the Income-Tax Act, 1961 (hereinafter referred to as the Act) for the opinion of this Court :

(2.) The assessee in this reference is an individual. M/s D. L. Narasimhaiah Family Trust and M/s. M. D. Veeranarasimhaiah Family Trust are partners in the registered firms of M/s. Jaya & Co., and M/s. D. L. Narasimhaiah & Brothers. D L. Narasimhaiah is the other partner in the firm M/s. D L. Narasimhiah & Brothers while M. D. Venkatanarasimhiah is the other partner in the firm M/s. Jaya & Co. In the D. L. Narasimhaiah Family Trust the beneficiaries are the 5 minor children of the said Narasimhaiah represented by their mother, trustee in the firm of M/s. Jaya & Co. Similarly in the Veeranarasimhiah Trust the 3 minor children of Veeranarasimhiah are represented by their mother as the trustee in the registered firm of Narasimhiah & Brothers. The said two trusts were created on 29-11-1969 and they were registered on 4-12-1969.

(3.) A sum of Rs. 10,000/-was settled by M. D. Veeranarasimhaiah in favour of the trust created by him ; while D. L. Narasimhiah settled a sum of Rs. 9999/- in favour of the other trust. The trust funds were invested in the said two firms and the trust-funds became partners in the respective firms. For the assessment year 1976-77, the share income received by the respective trusts from the firms were apportioned equally between the respective beneficiaries and taxed in their hands.