Genuineness of firm and assessment of income in its own hands upheld, with no interference in reference jurisdiction.

A Tribunal's finding that a firm was genuine and that its income was assessable in its own hands was held to be a factual conclusion not open to interference in reference jurisdiction under section 256(2) of the Income-tax Act, 1961. The court noted that the Tribunal had relied on prior acceptance of the firm's genuineness, actual rendering of services, the presence of stranger partners, and the firm's low net income, all supporting the view that it was not created merely to divert company profits. As the finding was backed by material and turned on appreciation of facts, no interference was warranted and the applications were dismissed.

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Issues: Whether the Tribunal's finding that the firm was genuine and that its income was assessable in its own hands could be interfered with in proceedings under section 256(2) of the Income-tax Act, 1961.

Analysis: The question whether the firm was genuine and whether the income returned by it should be excluded from the company's assessment depended on appreciation of facts. The Tribunal had relied on the earlier acceptance of the firm's genuineness, the rendering of services by the firm, the presence of stranger partners, and the low net income of the firm, all of which supported the conclusion that the firm was not floated merely to divert company profits. In such circumstances, the finding was supported by material and did not call for interference in reference jurisdiction.

Conclusion: The finding that the firm was genuine was upheld, and no interference was warranted under section 256(2). The applications were dismissed, in favour of the assessee.

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