P NAGALINGAM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) At the instance of the assessee, the following question was referred by the Income-tax Appellate Tribunal for the opinion of this court under section 256 (1) of Income-tax Act, 1961 :

(2.) The relevant assessment year is 1976-77. The assessee, Sri Nagalingam, is a partner of the firm, M/s. Pabbati Nagalingam, in which he holds 90% share and the remaining 10% is held by Smt. V. Jayalaxmi. A sum, of Rs. 30,000 was debited to the personal account of Sri Nagalingam and he converted the same into an asset of the joint family consisting of himself, his wife and his minor son by means of a declaration dated 19/06/1975. The transfer was treated as a gift and assessed to gift-tax. The amount of Rs. 30,000 was invested in the partnership concern of M/s. Pabbati Nagalingam. The Income-tax Officer applied section 64 (2) (b) of the Income-tax Act, 1961 (for short "the Act"), and held that the entire income that came to the share of the assessee must be treated as his personal income. The contention raised by the assessee that the interest part in relation to the said sum of Rs. 30,000 which worked out to Rs. 3,346 alone was attributable to the converted property with in the meaning of section 64 (2) (b) of the Act and, therefore, the rest of the income should be taxed as belonging to the Hindu undivided family was negatived by the Income-tax Officer. The Appellate Assistant Commissioner, on appeal, the Income-tax Appellate Tribunal, agreeing with the view taken by the assessing authority and the first appellate authority, held :

(3.) At the instance of the assessee, the aforesaid question was referred to this court.