RAMESHWARLAL LOHARIWALLA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court:

(2.) By an indenture dated the 10th January, 1946, a partnership firm was created in which Sagarmal Lohariwalla had 10 annas share and Ramesh-warlal Lohariwalla had 6 annas share. On the 6th November, 1949, Sagarmal and Rameshwarlal executed a deed of trust covering the business which was carried on under the partnership deed mentioned hereinbefore.

(3.) In the preamble to the document it was mentioned that the entire property represented by the said business should vest in a body of persons consisting of Sri Prithi Raj Thard, Sm. Mahadei, wife of Sagarmal, and the two donors, namely, Sagarmal and Rameshwarlal, who were collectively referred to as the donees or trustees. According to the document, the business was to be carried on by the donees or trustees, 3/4ths of the profits accruing each year was to be allocated or distributed equally, that is to say, at 6 annas each to Sagarmal and Rameshwarlal, and the remaining 1/4th share was to be allocated and distributed to a "charity account" in the ledger to be applied or accumulated and thus set apart for religious or charitable purposes in the manner mentioned in the said document. On the 23rd May, 1952, in the assessment order, the ITO referred to the earlier partnership and also to the document dated the 6th November, 1949. The , Income-tax Officer held that two of the beneficiaries, viz., Sagarmal and Rameshwarlal, would be assessed directly as per allocation given in the assessment order while the charity income should be assessed in the hands of the trustees. This was in respect of the assessment year 1950-51.