GURU CHARAN SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) ON an application being filed under section 256(1) of the Income -tax Act, 1961 ('the Act') the Tribunal has referred the following questions for the opinion of this Court:

(2.) THE learned counsel for the assessee argues with force that the proximate cause of making of profit in the partnership business is not the gift which the assessee had made in favour of his wife and until that is established, the income of the assessee's wife from the partnership firm cannot be included with the income of the assessee. The learned counsel relies upon the decision of the Supreme Court in CIT v. Prem Bhai Parekh : AIR 1970 SC 1518 as well as the decision of the Supreme Court in CIT v. Prahaladrai Agarwala, AIR 1990 SC 270.

(3.) IN Prahaladrai Agarwala's case (supra) their Lordships considered section 64(1)(iii). In that case also, the assessee had gifted away some money to his wife and the wife invested that amount in a partnership business and the question for consideration was whether the income, which the wife got from the partnership business, can be clubbed with the income of the assessee's husband under section 64(1)(iii). Their Lordships of the Supreme Court reiterated the earlier view of the Court in Prem Bhai Parekh's case (supra) and held: