Holding

The income assigned to the trust is assessable in the hands of the assessee; the assignment does not create an overriding title and therefore the revenue's appeal is allowed.

Summary

Sunil J. Kinariwala, a partner in a firm, created a trust and assigned fifty percent of his ten percent partnership share to the trust, claiming that the income was diverted at source and therefore not assessable in his total income. The Income Tax Officer held the assignment to be an application of income and included it in the assessee's income; the Appellate Assistant Commissioner allowed the exclusion, but the Tribunal reversed that order and referred the matter to the Gujarat High Court. The High Court held that the assignment created an overriding title in favour of the trust, making the income of the trust not assessable in the partner's hands. On appeal, the Supreme Court examined whether the assignment constituted a diversion of income by overriding title or merely an application of income after receipt. Relying on the test that diversion occurs only when the income never reaches the assessee, the Court held that the trust, as an assignee under Section 29(1) of the Partnership Act, received the income only after the partner had received it, so the income must be included in the partner's total income. Consequently, the revenue's appeal was allowed and the High Court judgment was set aside.

Issues considered

Whether the assignment of fifty percent of the assessee's partnership share to a trust creates an overriding title, rendering the income of the trust not assessable in the assessee's total income.
Whether the sum of Rs.20,141 representing the assigned share is the real income of the trust and not of the assessee.
Whether the assignment is valid under the deed of trust and the provisions of the Indian Partnership Act, 1932.

Legislation cited

Income Tax Act, 1961s. 256(2), s. 60
Indian Partnership Act, 1932s. 29(1)

Subjects

Income TaxDiverted IncomeOverriding TitlePartnershipTrust AssignmentSection 60Section 256Section 29Application of IncomeTotal Income Assessment

Judgment

A COMMISSIONER OF INCOME TAX
1~
v.
SUNIL J. KINARIWALA

DECEMBER I 0, 2002

B [SYED SHAH MOHAMMED QUADRI AND K.G.
BALAKRISHNAN, JJ.]

Income Tax Act, 1961; Sections 60 and 256(2):

c Assessee, a partner in a firm assigned part of his share income to a
Trust-Tribunal held the income so assigned to Trust would be included in the
total income of the assessee for the purpose qf assessment-High Court
reversing the same-On appeal held, since Trust receives share of income of
the assigner partner as assignee and not as a sub-partner it is a case of
!J application of income by the assessee and not diversion qf income by. over
riding title-Such share of income of assessee of the firm could be included
in total income for the purpose ofassessment-!ndia11 Partnership Act-Section
29(1).

Assessee-appellant, a partner in a firm, created a Trust and assigned
2 part of his share/income to Trust and claimed it as diversion of income at
source, thus not included in his total income for the purpose of assessment.
Income Tax Officer rejected the claim considering it a case of application
of income and not diversion of income at source. Appellate Authority
reversed the order. On appeal by Revenue, Tribunal reversed the order
of appellate authority. Tribunal formulated questions for the opinion oi
F High Court on the issues: Whether any income from share oftht>.assessee
in the partnership firm was validly assigned and belongs to the Trust by II
overriding title and assessable only in the hands of Trust. High Court ·
answered the questions in affirmative and the ruling was followed in
several pending cases on the same issue. Hence this appeal by the Revenue
G and other connected appeals.

If was contended for the Revenue that since assessee assigned right
to receive part of profits from his share in the firm, there was no
overriding title in the Trust to divert income at source, such income liable
to be included in the total income of the assessee for the purpose of
H 650
C.l.T. v. S.J. KINARIWALA 651

assessment. On behalf of the assessee, it was submitted that since the Trust A
was entitled to receive share of the income of the assessee under the
settlement deed, the Trust n·as getting such incorrie by virtue of overriding
title.

Allowing the appeals, the Court
B
HELD: I.I. Under the scheme of the Income tax Act, it is the total
income of an assessee, computed under the provisions of the Act, that is
assessable to income tax. So much of the income which an assessee is not
entitled to receive by virtue of an over-riding title created in favour of a
third party would get diverted at source and the same cannot be added in C
computing the total income of the assessee. The nature and effect of the
assessee's obligation is the determinative factor in regard to the income
attributable to an assessee when it gets diverted by over-riding title. When
a third person becomes entitled to receive the amount under an obligation
of an assessee even before he could lay a claim to receive it as his income,
there would be diversion of income by over-riding title; but when after D
receipt of the income by the assessee, the same is passed on to a third
person in discharge of ihe obligation of the assessee, it will be a case of
application of income by the assessee and not of diversion of income by
over-riding title. 1655-E-GI

K.A. Ramachar and Anr. v. Com1nissioner of Income Tax, Madras, E
(1961) 42 l.T.R. 25 and Moti Lal Chhadami Lal Jain v. Commissioner of
Income Tax, (1991) 190 ITRI, relied on

Bejoy Singh Dudhuria v. Commissioner of Income-tax, 119331 I l.T.R.
135; P.C. Mullick v. Commissioner of Income-tax (1938) 6 l.T.R. 206 and
Commissioner of Income Tax. Bombay City-II v. Sita/das Tirathdas, (1961) F
41 l.T.R. 367, referred to.

1.2. It is apt to notice that there is a clear distinction between a case
where a partner of a firm assigns his share in favour of a third person
and a case where a partner constitutes a sub-partnership with his share G
in thll' main partnership. In the former case, in view of Section 29(1) of
the Indian Partnership Act, the assignee gets no right or interest in the
main partnership, except, of course, to receive that part of the profits of
the firm referable to the assignment and to the assets in the event of
dissolution of the firm, but in the later case, the sub-partnership acquires
a special interest in the main partnership. f659-H; 660-A, Bi H
•
652 SUPREME COURT REPORTS [2002] SUPP. 4 S.C.R.

A 1.-3. In the instant case, it cannot be treated as one of a sub-
partnership, though in view of Section 29(1) of the Act, the Trust, as an
assignee, becomes entitled to receive the assigned share in the profits from
the firm not as a sub-partner because no sub-partnership came into
. existence but as an assignee of the share of income of the assigner-partner.
For these reasons, the order under challenge cannot be sustained.
B Consequently, the share of the income of the assessee assigned in favour
of the Trust has to be included in the total income of the assessee. Thus in
all these appeals, the questions are answered in favour of the Revenue and (

against the assessee. [66-B-D[

C Commissioner of Income-tax Madras v. Bhagyalakshmi and Co., (1965)
55 I.T.R. 660 and Murlidhar Himatsingka and Anr. v. Commissioner of
Income-tax, Calcutta (1966) 62 I.T.R. 660, distinguished.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1899 of
2002.
D
Froin the Judgment and Order dated 29.10.1993 of the Gujarat High
Court in I.T. No. 191 of 1980.

WITH

E C.A. Nos. 6148-57, 6375-6412/98, 502012000, 3792, 3830, 3829,
3827/99, 3373/2000 and 5720 of 1998.

Preetesh Kapur, Ranbir Chandra, K.C. Kaushik, Ms. Lakshmi Iyengar,
Ms. Sunita Sharma, Ms. Neera Gupta, B.V.B. Das and Ms. Sushma Suri for
the Appellant.
-
F
U.U. Lalit, H.A. Raichura and S.H. Raichura for the Respondent.

The Judgment of the Court was delivered by

SYED SHAH MOHAMMED QUADRI, J.
-
G Civil Appeal No. 1899 of 2002: 0

This appeal, by the Revenue, is directed against the judgment of the
Division Bench of the High Court of Gujarat in Income Tax Reference No.
191 of 1980 dated 29th October, 1993 [Sunil J. Kinariwala v. Commissioner
H of Income Tax, reported in (1995) 2111.T.R. 127.]
C.I.T. v. S.J. KINARIWALA (QUADRI. J.] 653

At the instance of the Revenue. the Income Tax Appellate Tribunal (for A
short. 'the Tribunal') referred the following questions, under Section 256( I)
of the Income Tax Act. 1961 (hereinafter referred to as 'the Act'). for the
opinion of the High Court:

"(I) Whether, on the facts and in ·the circumstances of the case, 50
per cent out of the assessee's ten per cent, right, title and interest in B
the partnership firm of Messrs. Kinariwala R.J .K. Industries belongs
to Sun ii J ivanlal Kinariwala Trust and the income arising therefrom
belongs to the said trust by overriding title?

(2) Whether, on the facts and in the circumstances of the case, the
sum of Rs. 20, 141 being the profits referable to 50 per cent, out of C
the assessee's right, title and interest often per cent, in the partnership
firm of Messrs. Kinariwala R.J.K. Industries is not the real income of
the .i:ssessee, but of Sunil Jivanlal Kinariwala Trust and as such
assessable only in the hands of the trust?
D
c:;) Whether, on the facts and in the circumstances of the case, fifty
pe!· cent, out of the assesseee's ten per cent, share.in the firm of
Messrs. Kinariwala R..J.K. Industries has been validly assigned to
Sunil Jivanlal Kinariwala Trust under the deed of trust dated December,
?.7, 1973, and whether the income arising therefrom belongs to the
said trust by way of overriding title?" E
The fact which gave rise to these questions may be noticed here.

The assessee, a partner in the pa1tnership firm, known as 'Mis.

.. Kinariwala R.J.K. Industries', Ahmedabad, (for short, 'the firm') was having
ten per cent share therein. On December 27, 1973, he created a Trust named
"Sunil Jivanlal Kinariwala Trust" by a deed of settlement assigning fifty
percent out of his ten per cent right, title and interest (excluding capital), as
F

a partner in the firm, and a. sum of Rupees five thousand out of his capital
in the firm in favour of the said Trust. There are three beneficiaries of the
Trust·the assessee's brother's wife, assessee's niece and the assessee's mother. G
In the Assessment Year 1974-75, he claimed that as fifty per cent of the
income attributable to his share from the firm, stood transferred to the Trust
resulting in diversion of income at source, the same could not be included in
his total income for the purpose of his assessment. The Income Tax Officer
rejected the claim on the view that it was a case of application of income and
I not diversion of income at source; he also found that Section 60 of the Act H
654 SUPREME COURT REPORTS [2002] SUPP. 4 S.C.R.

A was attracted as only income without transfer of asset was settled. Against
the order of assessment, the assessee appealed before the Appellate Assistant
Commissioner of Income Tax who allowed the appeal directing that a sum
of Rs. 20, 141 / which stood transferred to the trust under the settlement, be
excluded from the total income of the asses~ee. However, on appeal by the
Revenue, the Tribunal reversed the order of the Appellate Assistant
B Commissioner. Thus the afore-mentioned questions of law came to be referred
to the High Court by the Tribunal.

The High Court, relying on the judgements of this Court in Commissioner
of Income tax, Madras v. Bhagyalakshmi and Co. (1965) 55 l.T.R. 660 and
C Mur/idhar Himatsingka and Anr. v. Commissioner of Income tax, Calcutta,
(1966) 62 l.T.R. 323, held inter a/ia, that on assignment of fifty per cent
share of the assessee in the firm, it became the income of the Trust by over
riding title and it could riot be added in the total income of the assessee. In
that view of the matter, the afore-mentioned Question Nos. (I) to (3) were
answered in the affirmative, in favour of the assessee and against the Revenue.
D
It appears that for a considerable time no steps to file an appeal were
taken against the impugned judgement of the High Court. On the assumption
that it was accepted by the Revenue, various matters were disposed of by the
High Court, following the said judgement. In some of those cases, special
E leave petitions were filed but they were dismissed on the ground that the
main judgement of the High Court was allowed to become final. Thereafter,
the Revenue woke up and challenged the said judgement by filing the present
appeal, That is how, the appeal came to be filed and is before us.

Mr. Preetesh Kapur, learned counsel appearing for the Revenue,
p contended that having regard to the terms of the settlement, what was assigned
was the right to receive profits to the extent of fifty per cent of the share of
the assessee; there was, therefore, no over riding title in the Trust so as to
divert the income at source and the High Court erred in treating the assignment
as resulting in diversion of the income. The q~estion of application of Section
60 .of the Act was urged as an alternative contention and was not seriously
G pursued. Mr. U.U. Lalit, learned counsel appearing for the respondent assessee,
on the other hand, argued that under Section 29 (I) of the Indian Partnership
Act., 1932, the Trust became entitled to receive fifty per cent share of the
assessee's income from the firm by assignment under the settlement deed
and, therefore, the Trust was getting the income by virtue of the over-riding
H title and the High Court had correctly answered the questions. Further, it was
C.l.T. v. S..I. KINARIWALA [QUADRI. J.] 655

conceded by the learned counsel for the parties that question Nos. and 3 A
overlap and they need to be re-framed. By order of this Court dated December
3, 2002, they were re-framed as Question No. I. Now, we have to advert to
the follo\ving two questions:

"(I). Whether, on the facts and in the circumstances of the case,
assign1nent of 50 per cent out of the assessee's ten per cent share in B
right, title and interest (excluding capital) in Mis. Kinariwala R.J.K.
Industries in favour of Sunil Jivanlal Kinariwala Trust under deed of
trust dated December 27, 1973 creates over riding title in favour of
the Trust and whether the income accruing to the Trust can be treated
as the income of the assessee? c
(2). Whether, on the facts and in the circumstances of the case, the
sum of Rs. 20, -14 I being the profits referable to 50 per cent, out of
theassessee's right, title and interest often per cent in the partnership
firm of Messrs. Kinariwala R.J.K. Industries is not the real income of
the assessee, but of Sunil Jivanlal Kinariwala Trust and as such D
assessable only in the hands of the trust?"
•• It may be pointed out that under the scheme of the Act, it is the total
income of an assessee, computed under the provisions of the Act, that is
assessable to income tax. So much of the income which an assessee is not
entitled to receive oy virtue of an over-riding . title created in favour of a third E
party would get diverted at source and the same cannot be added in co1nputing
the total income of the assessee. The principle is simple enough but 1nore
' often than not, as in the instant case, the question arises as to what is the
criteria to detennine, when does the income attributable to an assessee get
diverted by over riding title? The determinative factor, in our view, is the
nature and effect of the assessee's obligation in regard to the amount in F
question. When a third person becoines entitled to receive the amount under
an obligation of an assessee even before he could lay a claim to receive it as
his income, there would be diversion of income by over riding title; but when
after receipt of the income by the assessee, the same is passed on to a third
person in discharge of the obligation of the assessee, it will be a case of G
application of income by the assessee and not of diversion of income by
over-riding title. The. decisions of the Privy Council in Bejoy Singh Dudhuria
v. Commissioner of Income tax, (1933) I LT.R. 135 and P.t. Mullick v.
Commissioner of Income tax, (1938) 6 l.T.R. 206 together are illustrative of
the principle of diversion of income by over-riding title.
H
656 SUPREME COU_RT REPORTS [2002] SUPP. 4 S.C._R.

A In Bejoy Singh Dudhuria (supra), under a compromise decree of
maintenance obtained by the step-mother of the assessee, a charge was created
on the prope1ties in his hand. The Law Lords of the Privy Council, reversing
the judgement of the Calcutta High Court, held that the amount of maintenance
recovered by the step-mother was not a case of application of the income of
B the assessee. In contrast, in P.C. Mullick (supra) under a Will, certain payments
had to be made to the beneficiaries by the executors and the trustees (assessees)
from the property of the testator. It was held by the Privy Council that such
payments could only be out of the income received by the assessees from the
property, therefore,· such payments were assessable to income tax in the
hands of the assessees and there was no diversion of income at source.
c Whereas in the fonrier case, the step-mother of the assessee acquired the
right to get the maintenance by virtue of charge created by the decree of the
court on the properties of the assessee even before he could lay his hands on
the income from the properties, but in the latter case, the obligation of the
assessee to pay amounts to the beneficiaries was required to be discharged
after receipt of the income. from the properties.
D
In Commissioner of Income Tax, Bombay City~ll v. Sitaldas Tii·athdas
(196 l) 41 I. T.R. 367, speaking for a Bench of three learned Judges of this ' \.-
Court, Hidayatullah, J. (as he then was) having considered, among others, the
aforesaid two judgements of the Privy Council laid down the test as follows:

E "In our opinion, the true test is whether the amount sought to be
deducted, in truth, never reached the assessee as his income. Obligation,
no doubt, there are in every case, but it is the nature of the obli.gation ,,.
which is the decisive fact. There is a difference between an amount
which a person is obliged to apply out of his income and an amount
which by the nature of the obligation cannofbe said to be a part of
F the income of the assess.ee. Where by the obligation income is diverted
before it reaches the· assessee, it is deductible; but where the income
is required to_ be applied to discharge' an obligation after. such ineome
reaches the assessee, the same consequence,. in law, does not follow.
It is the first kind of p~yment which can truly be excused and not the
G second. The second payment is merely an obligation to pay another
a portion of one's own income, which has been received and is since
applied. The first is a case in which the income never reaches the
assessee, who even if he were to collect it, does so, not as part of his
income, but for and on behalf of the person to whom it is payable."

H In that case, the respondent-assessee derived his income from many sources.
C.l.T. 1-. S..I. KINARIWALA [QUADRl. l.I 657
He sought to deduct certain su1ns of 1noney on the ground that under a A
consent decree. he \Vas required to pay those sums as 1naintenance to his wife
and children. Though no charge \\'a.s created on the prope1ties of the assessee
by the co111pron1ise decree. the decreed sun1s \\'ere. in fact, paid by the assessee
to his wife and children. The High Court took the view that notwithstanding
absence of specific charge upon the properties of the assessee, the assessee B
was under an obligation to pay 1naintenance under the decree which could be
enforced by a court of law and purporting to apply the principle of Bejcy
Singh Dudhuria (supra), held that in view of the decree of the court, the sums
must be taken to have been diverted to the wife and children and never
became income in the hands of the assessee. Setting aside the judge.men! of
the High Court, this Court held, C
"In our opinion, the present case is one in which the wife and children
of the assessee who continued to be members of the family received
the income as his own. The case is one of application of a portion of
the inco1ne to discharge an obligation and not a case in which by an
overriding charge the assessee became only a collector of another's D
income. The matter in the present case would have been different if
such an overriding charge had existed either upon the property or
upon its income, which is not the case. In our opinion, the case falls
s
outside the rule in Bejoy Singh Dudhuria case and rather falls with
in the rule stated by the judicial Committee in P.C. Mullick's case."
E
Wf' may notice a few decisions as instances of application of the principle
of diversion of inco1ne by over-riding title.

In K.A. Ra1nachar and Anr. v. Con1111issioner of lncon1e Tax, Madras
(1961) 42 l.T.R. 25, the assessee was a partner in a firm. He executed three
deeds of settlement in favour of his wife, married daughter and a minor F
daughter, assigning to each of them one-fourth of his share of the profits in
the firm. They were entitled to receive and collect their share from the firm
under the settlement. The assessee contended that the amounts covered by the
settlements could not be included in his total income for the purpose of
assessment to income tax. App'··ing the principle laid down in Sita/das G
Tirathdas (supra), it was held that under the law of partnership, it was the
partner and the partner alone who was entitled to profits and that a stranger,
even if he were an assignee, did Jh)t have and could not have any direct claim
to the profits. The claim of the assessee was negatived on the ground that
what was paid was in law a portion of his income, as such the amounts have
to be included in his total income. The ratio of this case squarely applies to H
658 SUPREME COURT REPORTS [2002] SUPP. 4 S.C.R.

A the facts of the case on hand.

In Moti Lal Chhadami Lal Jain v. Commissioner of Income Tax ( 1991)
190 I.TR. I, a company took over the business of the Hindu Undivided
Family (referred to as 'the landlord'). Under the agreement of lease with the
landlord, the company was required to pay Rupees ten thousand to a college,
B run by a Trust out of the annual rent of Rupees twenty one thousand. In a
subsequent agreement entered into between the landlord the company, the
Trust and the college, it was stipulated, inter alia, that in the event of failure
to pay the amount to the college, it would have full right to recover the said
amount by recourse to the court and that the college shall have the first
C charge on the property. The landlord claimed that the amount paid to the
college was the income of the college as it got diverted by over-riding title
and ceased to be the income of the landlord. That contention was rejected by
the Tribunal as well as the High Court. On appeal to this Court, applying the
principle in Sitaldas Tirathdas (supra), it was held by a Bench of three
learned Judges that the stipulation in the agreement to pay Rupees ten thousand
D out of the annual rent directly to the college was only a mode of application
of the income of the landlord, which made no difference to its liability to pay
tax on the entire rent of Rupees twenty one thousand which had accrued to
the landlord. The fact that the college was given the right to sue and recover
Rupees ten thousand directly from the company in case of default, it was
.E observed, did not alter the position, nor would creation of charge in favour
of the college make any difference.

Now, we shall advert to the cases relied upon by the High Court.

In Bhagyalakshmi (supra), two members of the Hindu Undivided Family
F together held ten annas share in a firm. On partition in the family, the share
of the s:tid members was divided among various members of .the family.
Thereafter, a fresh partnership deed was executed in which the said two
persons were, however, shown as having the same proportion of share in the
finn. They claimed that they were liable to pay .tax only on the respective
shares shown in the partnership deed. That contention was upheld by the
G Tribunal. Thereafter, the Commissioner cancelled the registration of the
partnership firm under the Act on the ground that it did not specify the
correct shares of the said two persons in the partnership. H was held by this
Court that the finn was entitled to be registered and that the shares given to
the said two persons in the partnership deed were correct according to the
H terms of the deed, although they would be answerable to the divided members
;
C.l.T. v. S.J. KINAR!WALA [QUADRI. !.] 659
of the family in respect of profits certaining to their shares. This case does A
not deal with the principle of diversion of income by over-riding title and is
of no help to the respondent-assessee to support his contention that there \Vas
di 1ersion of incon1e by over-riding title in his case.

In Murlidhar Himatsingka (supra), one of the partners of the firm
constituted a sub-partnership firm with his two sons and a grandson. The B
deed of sub-partnership provided that the profits and losses of the partner in
the main firm shall belong to the sub-partnership and shall be borne and
divided in accordance with the shares specified therein. The question in that
case was: whether the share of the partner in the main finn, who had become
a partner in the sub-partnership, could be assessed in his individual assessment. C
It was held that there was over-riding obligation which converted the income
of the partner in the main firm into the income of the sub-partnership and,
therefore, the income attributable to the share of the partner had to be included
in the assessment of the sub-partnership. That was on the principle that a
partner in the sub-partnership had a definite enforceable .right to claim a
share in the profits accrued to or received by the other partner in the main D
partnership, as on entering into a sub-partnership, such a partner changes his
character vis-a-vis the sub-partners and the Income Tax authorities. Further,
a sub-partnership creates a superior title and results in diversion of the income
from the main firm to the sub-partnership before the same becomes the
income of the concerned partner. In such a case, even if the partner receives E
the income from the main partnership, he does so not on his behalf but on
behalf of the sub-partnership. Distinguishing K.A. Ramachar (supra), it was
observed,

"In that case it was neither urged nor found that sub-partnership came
into existence between the assessee who was a partner in a firm and F
his wife, married daughter and minor daughter. It was a pure case of
assignment of profits (and not losses) by the partner during the period
of eight years. Further the fact that a sub-partner can have no direct
claim to the profi~s vis-a-vis the other partners of the firm and that
it is the partner alone who is entitled to profits vis-a-vis the other
partners does not show that the changed character of the partner G
should not be taken into consideration for income-tax purposes."

It is apt to notice that there is a clear distinction between a case where .
a partner of a firm assigns his share in favour of a third person and a case
where a partner constitutes a sub-partnership with bis share in the main
partnership. Whereas in the formor case, in view of section 29(1) of the H
660 SUPREME COURT REPORTS [2002] SUPP. 4 S.C.R.

A Indian Partnership Act, the assignee gets no right or interest in the main
partnership except of course, to receive that part of the profits of the firm
referable to the assignment and to the assets in the event of dissolution of the
firm, but in the latter case, the sub-partnership acquires a special interest in
the main partnership. The case on hand cannot be treated as oAe of a sub-
partnership, though in view of Section 29( I) of the Indian Partnership Act.
B The Trust, as an assignee, becomes entitled to receive the assigned share in
the profits from the firm not as a sub-partner because no sub-partnership
came into existence but as an assignee of the share of income of the assigner-
partner.

C In this view of the matter, it is unnecessary to consider the alternative
contention based on Section 60 of the Act.

For the aforementioned reasons, we are of the view that the order under
challenge cannot be sustained. It is, accordingly, set aside. Consequently, the
share of the income of the assessee assigned in favour of the Trust has to be
D included in the total income of the assessee. The questions are, accordingly,
answered in favour of the Revenue and against the assessee.

The civil appeal is, accordingly, allowed but in view of the peculiar i .

facts in which the appeal came to be filed, we make· no order as to costs.

Civil Appeal Nos. 6148-57/1998, 6375-6412/1998, 5020/2000, 3792/
E 1999, 3830/1999, 3829/1999, 3827/1999, 3373/2000 and 5720/1998.

These appeals have been disposed of by the impugned orders of the
High Court following the decision in Sunil J. Kinariwala v. Commissioner of
Income Tax, (1995)2111.T.R. 127, which has ~ince been reversed in Civil
Appeal No. 1899 of 2002 today.
F
In view of the aforesaid judgement, the orders under appeal are set
aside. The applications under Section 256(2) of the Income Tax Act, 1961
are allowed and the questions mentioned therein are ordered to be referred.
They are, accordingly, answered in terms of the said judgement.

G The civil appeals are allowed in the above terms.

No costs.

S.K.S. Appeals allowed.