Law:

Section:

JUDGMENT M.C. Desai, CJ.-This is a statement of case submitted under section 66(1) of the Income-tax Act by the Income-tax Appellate Tribunal, Allahabad Bench, partly at the instance of the assessee and partly at the instance of the Commissioner of Income-tax, U.P. It arises out of an order passed by the Tribunal on June 27, 1959, in respect of assessment of the assessee to income-tax for the assessment year 1948-49, the accounting year being the year ending on October 6, 1947. The questions that have been trained by the Tribunal and are to be answered by us are as follows : "(1)Whether, on the facts and in the circumstances of the case, the receipt of Rs. 35,01,000 constituted income liable to tax under section 10 of the Income-tax Act ? (2)Whether it was competent to the Appellate Assistant Commissioner to invoke the provisions of section 12B for the assessment of Rs. 35,01,000 when the Income-tax Officer had assessed the amount under section 10 of the Income-tax Act ? (3)Whether, on the facts and in the circumstances of the case, the receipt of Rs. 35,01,000 was taxable under section 12B of the Income-tax Act ?" The first question is the question that requires to be answered first and it was framed at the instance of the Commissioner. The other two questions arise only if the first question is answered against the Commissioner. The second question is framed at the instance of the assessee and is to be answered before the third question framed at the instance of the Commissioner. The third question is to be answered only if the second question is answered against the assessee ; otherwise it does not arise. The assessee is a firm consisting of three partnerships belonging to the Bagla firm of Kanpur and carrying on the business of financing, money-lending, working as selling agent, etc. On April 29, 1946, the assessee entered into an agreement with three members of the Jaipuria family for constituting a partnership known as Bagla Jaipuria and Co. with the object of acquiring controlling shares in Swadeshi Cotton Mills and another mill. The three Baglas constituting the assessee-firm owned half-share in the partnership and the three Jaipurias owned the other…

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