S. K. KAPUR ( 1 ) THE following two questions have been referred to this Court by the Income-tax Appellate Tribunal (Delhi Bench) under section 66 (1) of the Indian Income-tax Act, 1922: " (1) Whether on the facts and in the circumstances of the case, the income of Rs. 3,489 which formed interest on call deposits was assessable under the head Other sources'?. (2) Whether on the facts and in the circumstances of the case, the said interest income could be allocated as income from 'other Sources' in the Partners' hands?. " (1a) Before I set out the facts of the case and proceed to answer the questions, it is necessary to deal with a preliminary objection raised on behalf of the Revenue that this Court has no jurisdiction in the matter ( 2 ) UNDER sub-section (8) of section 66 of the Indian Income-tax Act, 1922. the jurisdiction with respect to the Union territories of Delhi and Himachal Pradesh was conferred on the High Court of Punjab. The relevant part of sub-section (8) of section 66 reads: "for the purposes of this section, 'the High Court' means (A ). . . . . . . . . . . . . . . . . . . . (B) In relation to the Union territories of Delhi and Himachal Pradesh, the High Court of Punjab; ( 3 ) THE Delhi High Court Act, 1966 (Act 26 of 1966) came into force on September 5, 1966, and section 3 thereof inter alia provides that: "as from such date as the Central Government may, by notification in the official Gazette,appoint, there shall be a High Court for the Union territory of Delhi (hereinafter referred to as the High Court of Delhi ). "october 31, 1966, was appointed by the Central Government under section 3 and the High Court of Delhi started functioning from that date Section 17 of the said Act provides for extension of the jurisdiction of the High Court of Delhi to the Union territory of Himachal Pradesh. This jurisdiction was extended from May 1, 1967. Section 12 deals with the transfer of proceedings from the High Court of Punjab to the High Court of Delhi Under that section the High Court of Punjab ceased to have jurisdiction in respect of the Union territory of Delhi as from the appointed day. This jurisdiction was extended from May 1, 1967. Section 12 deals with the transfer of proceedings from the High Court of Punjab to the High Court of Delhi Under that section the High Court of Punjab ceased to have jurisdiction in respect of the Union territory of Delhi as from the appointed day. This was subject to an exception that where any proceedings sought relief in respect of any order passed by the High Court of Punjab before the appointed day, the jurisdiction continued with the Punjab High Court but the Chief Justice of the Punjab High Court could transfer such proceedings to the High Court of Delhi if it appeared to him that they ought to be so transferred. The transfer order could, however, be made after such proceedings had been entertained by the High Court of Punjab. It is appropriate to set out sections 17 and 18 as the main arguments on the point centered round the interpretation of these provisions: "extension of the jurisdiction of the High Court of Delhi. (1) As from such date as the Central Government may, by notification in the Official Gazette, appoint (hereinafter referred to as the prescribed date), the jurisdiction of the High Court of Delhi shall extend to the Union territory of Himachal Pradesh. (2) As from the prescribed date the Court of the Judicial Commissioner for Himachal Pradesh shall cease to function and is hereby abolished: Provided that nothing in this sub-section shall prejudice or affect the continued operation of any notice served, injunction Issued, direction given, or proceedings taken before the prescribed date by the Court of the Judicial Commissioner for Himachal Pradesh abolished by this sub-section (3) The High Court of Delhi shall have, in respect of the territories for the time being included in the Union territory of Himachal Pradesh (a) All such original, appellate and other jurisdiction as under the law in force immediately before the prescribed date, is exercixable in respect of the said territories by the Court of the Judicial Commissioner for Himachall Pradesh; and also (b) ordinary original civil jurisdiction in every suit the value of which exceeds twenty- five thousand rupees, notwithstanding anything contained in any law for the time being in force. (4) All proceedings pending in the Court of the Judicial Commissioner for Himachal Pradesh before the prescribed date shall stand transferred to the High Court of Delhi. (4) All proceedings pending in the Court of the Judicial Commissioner for Himachal Pradesh before the prescribed date shall stand transferred to the High Court of Delhi. (5) Any order made before the prescribed date by the Court referred to in sub-section (4) shall for all purposes have effect not only as an order of that Court but also as an order of the High Court of Delhi. (6) For the removal of doubts, it is hereby declared that the provisions of sections 6 to 11 and 13 shall, with the necessary modifications, apply the High Court of Delhi in the exercise of jurisdiction conferred upon it by this section. (7) All proceedings pending immediately before the prescribed date in any subordinate Court in the Union territory of Himachal Pradesh in or in relation to any such civil suit as is referred to in clause (b) of sub-section (3) shall on that date stand transferred to the High Court of Delhi which shall proceed to try, hear and determine the matter as if it had been pending therein. 18. Rule of construction. (1) References in any law in force in the Union territory of Delhi to the High Court of Punjab shall, as from the appointed day, be construed in relation to that Union territory as references to the High Court of Delhi. (2) References in any law in force in the Union territory of Himachal Pradesh to the High Court of Punjab or to the Court of the Judicial Commissioner for that territory shall, as from the prescribed date, be construed in relation to that Union territory as references to the High Court of Delhi" ( 4 ) IT is common case of the parties that before the extension of the jurisdiction of this. Court to the Union territory of Himachal Pradesh, the Court of Judicial Commissioner had no advisory jurisdiction to deal with income-tax references. The contention on behalf of the Revenue is that by virtue of sub-section (3) of section 17, this Court is, in respect of the territones tor the time being included in the Union territory of Himachal Pradesh, vested with only original, appellate and all other jurisdiction as under the law in force immediately before the prescribed date was exercisable by the Court of the Judicial Commissioner and since the Court of Judicial Commissioner had no advisory jurisdiction. the same has not been transferred to this Court This argument overlooks the effect ot section 18 of the Delhi High Court Act. 1966 Under sub-section (2) references in any law in force in the Union territory of Himachal Pradesh to the High Court of Punjab is as from the prescribed date, to be construed as references to High Court of Delhi Indian Income- tax Act, 1922, is a law in force in the Union territory of Himachal Pradesh. The effect of section 18 therefore, is that from May 1, 1967 the words "the High Court of Punjab' in sub-section (8) of section 66 have to be substituted by the words "the High Court of Delhi" S. 17 of the Delhi High Court Act merely deals with the transfer of iurisdiction vested in the Judicial Commissioner to the High Court ot Delhi and does not in any manner limit the Impact of section 18 on section 66 (8) of the Indian Income-tax Act It the argument of the Revenue were to be accepted, an irreconcilable conflict would come into being between the Indian Income-tax Act and the Delhi High Court Act The whole object of the Legislature in passing Delhi High Court Act was to vest the jurisdiction over the territories covered thereby in Delhi High Court and the interpretation placed by me accords with that object. The learned counsel for the Revenue wanted us to limit section 18 of Delhi High Court Act to matters covered by S. 17 I am unable to construe a statute in such a manner as results in the demise of all principles of interpretation based on commonsense convenience and experience of ages ( 5 ) THE learned counsel for the assesse. also referred to sections 5 and 39 of the Punjab Reorganisation Act. 1966 (Act 31 of 1966) which came into force on September 18, 1966. but in view of the clear language of section 18 of the Delhi High Court Act it is necessary to elaborate on the same; my conclusion there fore, is that this Court has iurisdiction in the matter ( 6 ) THIS takes me to the merits of the case. but in view of the clear language of section 18 of the Delhi High Court Act it is necessary to elaborate on the same; my conclusion there fore, is that this Court has iurisdiction in the matter ( 6 ) THIS takes me to the merits of the case. We are concerned in this reference with the assessment year 1961 62, the relevant accounting period being the year ended February 28, 1961 Saraf Mull Rairoo Mull a partner ship firm (hereinafter to be referred as the assessee') had income from interest on securities general merchandise business motor parts business and commission agency. The assessee maintained one profit and Toss account in respect of all its business activities. The assessee used to deposit some moneys in call deposit accounts with banks and earned interest thereon The assessee had one consolidated interest account with respect to interest on call deposits and earned from other parties. The total interest received by the assessee amounted to Rs. 15,497-07 paise while the interest paid by it was Rs. 11,816-47 paise, leaving a profit of Rs 3,680-60 paise. The Income-tax Officer determined a sum of Rs 3 489 as the interest realized on call deposits He assessed this amount under the head "other sources" rejecting the contention of the assessee that it ought to have been taxed under the head "business" The Appellate Assistant Commissioner also up held the decision of the Income-tax Officer ( 7 ) AGGRIEVED by the order of the Appellate Assistant Commissioner, the assessee took an appeal to the Appellate Tribunal which was decided against the assessee on July 15, 1963 The Income-tax Appellate Tribunal found : "one thing will be clearly seen from the above, In the case cited above (Bihar State Co-operative Bank, Ltd. v Commissioner of Income-tax, ( AIR 1960 SC 789 ). the assessee was a bank and one of its objects was to carry on the genera] business of banking On the other hand here the assessee was not a bank but a firm which had income from interest on securities, genera] merchandise business motor parts business, arhat and commission agency. Money did not form part of the circulating capital as in the case which we have just considered In those circumstances, simply because the assessee got some interest income it could not be stated that it formed part and parcel of the business income. Money did not form part of the circulating capital as in the case which we have just considered In those circumstances, simply because the assessee got some interest income it could not be stated that it formed part and parcel of the business income. As the A. A. C hag stated there appears to be no money-lending business done by the assessee and hence any interest received by it by some call deposits casually made. it could be only income from other sources. We. therefore, hold that the view taken by the departmental officials is correct " ( 8 ) ONE ot the grievances made by the learned counsel for the assessee is that the Tribunal erred in observing that "the A. A. C has stated there appears to be no money-lending business done by the assessee" According to him, the Appellate Assistant Commissioner had given no such finding. Apart from the fact that I am doubtful whether this contention is open tothe assessee having regard to the frame of the question referred I find that the Appellate Assistant Commissioner has clearly recorded a finding that "the appellant did not deposit the surplus funds in the banks during the course of any money-lending business. It has not been challenged by the assessee that the observation of the Tribunal approving the aforesaid finding of the Appellate Assistant Commissioner is not based on any material or evidence ( 9 ) THE learned counsel for the assessee then contended that the business of the assessee consisted of the commission agency which necessarily involved advancing money to its constituents It has, therefore, to keep the surplus funds in the banks so that they could be readily available for the purpose and therefore, the entire capital of the assessee was in the nature of a circulating capital and every accretion thereon taxable under section 10 of the Indian Income tax Act. 1922 He also argued that the assessee. being a firm. was incompetent to derive income from any source other than business and, therefore, the residuary section 12 of the Indian Income-tax Act, 1922, could not be applied. He strongly relied on the decision of their Lordships of the Supreme Court in AIR 1960 8c 789. 1922 He also argued that the assessee. being a firm. was incompetent to derive income from any source other than business and, therefore, the residuary section 12 of the Indian Income-tax Act, 1922, could not be applied. He strongly relied on the decision of their Lordships of the Supreme Court in AIR 1960 8c 789. That was a case of a bank and it was observed: "it cannot be said that the business of such a bank consists only in receiving deposits and lending money to its members or such other societies as are mentioned in the objects and that when it lays out its moneys so that they may be readily available to meet the demand of its depositors if and when they arise, it is not a legitimate mode of carrying on of its banking business. The Privy Council in 1940-8 ITR 635 == (AIR 1940 PC 230) where the profits arose from the sale of Government securities pointed out at page 645 (of ITR): (at p. 236 of AIR), that in the ordinary cases the business of a bank essentially consists of dealing with money and credit. Depositors put their money in the bank at a small rate of interest and in order to meet their demands if and when they arise the bank has always to keep sufficient cash or easily realisable securities. That is a normal step in the carrying on of the banking business. In other words, that is an act done in what is truly the carrying on or carrying out of a business'. It may be idded that another mode of conducting business of a bank is to place its fund in deposit with other banks and that also is to meet demands which may be made on it. " ( 10 ) AS I read the decision in Bihar State Co-operative Bank's case, Alr 1960 SC 789, the ratio appears to be that the activity in question there was termed as a normal step in carrying on of the banking business In other words, according to the decision of their Lordships, only-such income as arises in the course of carrying on of a business can be taxed under lection 10. In this case it has been found as a fact by the Income-tax Appellate Tribunal that the moneys were not deposited as a part of its money-lending activity Apart from that. In this case it has been found as a fact by the Income-tax Appellate Tribunal that the moneys were not deposited as a part of its money-lending activity Apart from that. it is difficult to accept that the assessee would lend money to bank as a part of its money- lending business. The findings of fact arrived at by the Tribunal run counter to the suggestion that depositing money in banks was a normal mode of the assessee's business. Under the circumstances of this case, therefore, it cannot be said that the income arose out of the carrying on or carrying out of the assessee's business. In my opinion, therefore, the income was rightly taxed under section 12. I would, therefore, answer the first question in the affirmative and against the assessee. ( 11 ) THE learned counsel for the assessee conceded that in case the first question was answered in favour of the Revenue, the second question would not arise. I would, however, like to express my concurrence with the finding of the Tribunal even on the second question. After the decision had been recorded by the Tribunal an application appears to have been made under section 35 of the Indian Income-tax Act, 1922, whereby it was contended that the Tribunal ought to have decided that when allocating the income of the firm in the hands of the partners it should be treated as business income. The Tribunal, however, found against the assessee. In the Income-tax Act, 1961, section 67 (2) has been introduced, for the first time. This sub-section provides that the share of a partner in the income or loss of a firm should in making the assessment on the partner be apportioned in the various heads in the same manner in which the firms' income had been determined. The introduction of this provision, however, does not, to my mind, introduce any change in law so far as the aspect under consideration is concerned. Of course, even under the 1922 Act if the income of a registered firm was assessed under the head 'business' that income would be assessable in the hands of the partners as business income. That would be so because common interest, mutual agency and division of profits are the essential conditions for the existence of a partnership and consequently the partners really carry on business in the name of the firm. That would be so because common interest, mutual agency and division of profits are the essential conditions for the existence of a partnership and consequently the partners really carry on business in the name of the firm. If, on the other hand, the income of the firm consists of income from property it cannot be suggested that such income in the hands of the partners should be treated a business income. My answer to the second question, therefore, would also be in the affirmative and against the assessee. The Revenue will also have the costs of this reference, which I assess at Rs. 250. S. K. KAPUR ( 1 ) THE following two questions have been referred to this Court by the Income-tax Appellate Tribunal (Delhi Bench) under section 66 (1) of the Indian Income-tax Act, 1922: " (1) Whether on the facts and in the circumstances of the case, the income of Rs. 3,489 which formed interest on call deposits was assessable under the head Other sources ?. (2) Whether on the facts and in the circumstances of the case, the said interest income could be allocated as income from other Sources in the Partners hands?. " (1a) Before I set out the facts of the case and proceed to answer the questions, it is necessary to deal with a preliminary objection raised on behalf of the Revenue that this Court has no jurisdiction in the matter ( 2 ) UNDER sub-section (8) of section 66 of the Indian Income-tax Act, 1922. the jurisdiction with respect to the Union territories of Delhi and Himachal Pradesh was conferred on the High Court of Punjab. The relevant part of sub-section (8) of section 66 reads: "for the purposes of this section, the High Court means (A ). . . . . . . . . . . . . . . . . . . . (B) In relation to the Union territories of Delhi and Himachal Pradesh, the High Court of Punjab; ( 3 ) THE Delhi High Court Act, 1966 (Act 26 of 1966) came into force on September 5, 1966, and section 3 thereof inter alia provides that: "as from such date as the Central Government may, by notification in the official Gazette,appoint, there shall be a High Court for the Union territory of Delhi (hereinafter referred to as the High Court of Delhi ). "october 31, 1966, was appointed by the Central Government under section 3 and the High Court of Delhi started functioning from that date Section 17 of the said Act provides for extension of the jurisdiction of the High Court of Delhi to the Union territory of Himachal Pradesh. This jurisdiction was extended from May 1, 1967. Section 12 deals with the transfer of proceedings from the High Court of Punjab to the High Court of Delhi Under that section the High Court of Punjab ceased to have jurisdiction in respect of the Union territory of Delhi as from the appointed day. This was subject to an exception that where any proceedings sought relief in respect of any order passed by the High Court of Punjab before the appointed day, the jurisdiction continued with the Punjab High Court but the Chief Justice of the Punjab High Court could transfer such proceedings to the High Court of Delhi if it appeared to him that they ought to be so transferred. The transfer order could, however, be made after such proceedings had been entertained by the High Court of Punjab. It is appropriate to set out sections 17 and 18 as the main arguments on the point centered round the interpretation of these provisions: "extension of the jurisdiction of the High Court of Delhi. (1) As from such date as the Central Government may, by notification in the Official Gazette, appoint (hereinafter referred to as the prescribed date), the jurisdiction of the High Court of Delhi shall extend to the Union territory of Himachal Pradesh. (1) As from such date as the Central Government may, by notification in the Official Gazette, appoint (hereinafter referred to as the prescribed date), the jurisdiction of the High Court of Delhi shall extend to the Union territory of Himachal Pradesh. (2) As from the prescribed date the Court of the Judicial Commissioner for Himachal Pradesh shall cease to function and is hereby abolished: Provided that nothing in this sub-section shall prejudice or affect the continued operation of any notice served, injunction Issued, direction given, or proceedings taken before the prescribed date by the Court of the Judicial Commissioner for Himachal Pradesh abolished by this sub-section (3) The High Court of Delhi shall have, in respect of the territories for the time being included in the Union territory of Himachal Pradesh (a) All such original, appellate and other jurisdiction as under the law in force immediately before the prescribed date, is exercixable in respect of the said territories by the Court of the Judicial Commissioner for Himachall Pradesh; and also (b) ordinary original civil jurisdiction in every suit the value of which exceeds twenty- five thousand rupees, notwithstanding anything contained in any law for the time being in force. (4) All proceedings pending in the Court of the Judicial Commissioner for Himachal Pradesh before the prescribed date shall stand transferred to the High Court of Delhi. (5) Any order made before the prescribed date by the Court referred to in sub-section (4) shall for all purposes have effect not only as an order of that Court but also as an order of the High Court of Delhi. (6) For the removal of doubts, it is hereby declared that the provisions of sections 6 to 11 and 13 shall, with the necessary modifications, apply the High Court of Delhi in the exercise of jurisdiction conferred upon it by this section. (7) All proceedings pending immediately before the prescribed date in any subordinate Court in the Union territory of Himachal Pradesh in or in relation to any such civil suit as is referred to in clause (b) of sub-section (3) shall on that date stand transferred to the High Court of Delhi which shall proceed to try, hear and determine the matter as if it had been pending therein. 18. Rule of construction. 18. Rule of construction. (1) References in any law in force in the Union territory of Delhi to the High Court of Punjab shall, as from the appointed day, be construed in relation to that Union territory as references to the High Court of Delhi. (2) References in any law in force in the Union territory of Himachal Pradesh to the High Court of Punjab or to the Court of the Judicial Commissioner for that territory shall, as from the prescribed date, be construed in relation to that Union territory as references to the High Court of Delhi" ( 4 ) IT is common case of the parties that before the extension of the jurisdiction of this. Court to the Union territory of Himachal Pradesh, the Court of Judicial Commissioner had no advisory jurisdiction to deal with income-tax references. The contention on behalf of the Revenue is that by virtue of sub-section (3) of section 17, this Court is, in respect of the territones tor the time being included in the Union territory of Himachal Pradesh, vested with only original, appellate and all other jurisdiction as under the law in force immediately before the prescribed date was exercisable by the Court of the Judicial Commissioner and since the Court of Judicial Commissioner had no advisory jurisdiction. the same has not been transferred to this Court This argument overlooks the effect ot section 18 of the Delhi High Court Act. 1966 Under sub-section (2) references in any law in force in the Union territory of Himachal Pradesh to the High Court of Punjab is as from the prescribed date, to be construed as references to High Court of Delhi Indian Income- tax Act, 1922, is a law in force in the Union territory of Himachal Pradesh. 1966 Under sub-section (2) references in any law in force in the Union territory of Himachal Pradesh to the High Court of Punjab is as from the prescribed date, to be construed as references to High Court of Delhi Indian Income- tax Act, 1922, is a law in force in the Union territory of Himachal Pradesh. The effect of section 18 therefore, is that from May 1, 1967 the words "the High Court of Punjab in sub-section (8) of section 66 have to be substituted by the words "the High Court of Delhi" S. 17 of the Delhi High Court Act merely deals with the transfer of iurisdiction vested in the Judicial Commissioner to the High Court ot Delhi and does not in any manner limit the Impact of section 18 on section 66 (8) of the Indian Income-tax Act It the argument of the Revenue were to be accepted, an irreconcilable conflict would come into being between the Indian Income-tax Act and the Delhi High Court Act The whole object of the Legislature in passing Delhi High Court Act was to vest the jurisdiction over the territories covered thereby in Delhi High Court and the interpretation placed by me accords with that object. The learned counsel for the Revenue wanted us to limit section 18 of Delhi High Court Act to matters covered by S. 17 I am unable to construe a statute in such a manner as results in the demise of all principles of interpretation based on commonsense convenience and experience of ages ( 5 ) THE learned counsel for the assesse. also referred to sections 5 and 39 of the Punjab Reorganisation Act. 1966 (Act 31 of 1966) which came into force on September 18, 1966. but in view of the clear language of section 18 of the Delhi High Court Act it is necessary to elaborate on the same; my conclusion there fore, is that this Court has iurisdiction in the matter ( 6 ) THIS takes me to the merits of the case. We are concerned in this reference with the assessment year 1961 62, the relevant accounting period being the year ended February 28, 1961 Saraf Mull Rairoo Mull a partner ship firm (hereinafter to be referred as the assessee ) had income from interest on securities general merchandise business motor parts business and commission agency. We are concerned in this reference with the assessment year 1961 62, the relevant accounting period being the year ended February 28, 1961 Saraf Mull Rairoo Mull a partner ship firm (hereinafter to be referred as the assessee ) had income from interest on securities general merchandise business motor parts business and commission agency. The assessee maintained one profit and Toss account in respect of all its business activities. The assessee used to deposit some moneys in call deposit accounts with banks and earned interest thereon The assessee had one consolidated interest account with respect to interest on call deposits and earned from other parties. The total interest received by the assessee amounted to Rs. 15,497-07 paise while the interest paid by it was Rs. 11,816-47 paise, leaving a profit of Rs 3,680-60 paise. The Income-tax Officer determined a sum of Rs 3 489 as the interest realized on call deposits He assessed this amount under the head "other sources" rejecting the contention of the assessee that it ought to have been taxed under the head "business" The Appellate Assistant Commissioner also up held the decision of the Income-tax Officer ( 7 ) AGGRIEVED by the order of the Appellate Assistant Commissioner, the assessee took an appeal to the Appellate Tribunal which was decided against the assessee on July 15, 1963 The Income-tax Appellate Tribunal found : "one thing will be clearly seen from the above, In the case cited above (Bihar State Co-operative Bank, Ltd. v Commissioner of Income-tax, ( AIR 1960 SC 789 ). the assessee was a bank and one of its objects was to carry on the genera] business of banking On the other hand here the assessee was not a bank but a firm which had income from interest on securities, genera] merchandise business motor parts business, arhat and commission agency. Money did not form part of the circulating capital as in the case which we have just considered In those circumstances, simply because the assessee got some interest income it could not be stated that it formed part and parcel of the business income. As the A. A. C hag stated there appears to be no money-lending business done by the assessee and hence any interest received by it by some call deposits casually made. it could be only income from other sources. We. As the A. A. C hag stated there appears to be no money-lending business done by the assessee and hence any interest received by it by some call deposits casually made. it could be only income from other sources. We. therefore, hold that the view taken by the departmental officials is correct " ( 8 ) ONE ot the grievances made by the learned counsel for the assessee is that the Tribunal erred in observing that "the A. A. C has stated there appears to be no money-lending business done by the assessee" According to him, the Appellate Assistant Commissioner had given no such finding. Apart from the fact that I am doubtful whether this contention is open tothe assessee having regard to the frame of the question referred I find that the Appellate Assistant Commissioner has clearly recorded a finding that "the appellant did not deposit the surplus funds in the banks during the course of any money-lending business. It has not been challenged by the assessee that the observation of the Tribunal approving the aforesaid finding of the Appellate Assistant Commissioner is not based on any material or evidence ( 9 ) THE learned counsel for the assessee then contended that the business of the assessee consisted of the commission agency which necessarily involved advancing money to its constituents It has, therefore, to keep the surplus funds in the banks so that they could be readily available for the purpose and therefore, the entire capital of the assessee was in the nature of a circulating capital and every accretion thereon taxable under section 10 of the Indian Income tax Act. 1922 He also argued that the assessee. being a firm. was incompetent to derive income from any source other than business and, therefore, the residuary section 12 of the Indian Income-tax Act, 1922, could not be applied. He strongly relied on the decision of their Lordships of the Supreme Court in AIR 1960 8c 789. 1922 He also argued that the assessee. being a firm. was incompetent to derive income from any source other than business and, therefore, the residuary section 12 of the Indian Income-tax Act, 1922, could not be applied. He strongly relied on the decision of their Lordships of the Supreme Court in AIR 1960 8c 789. That was a case of a bank and it was observed: "it cannot be said that the business of such a bank consists only in receiving deposits and lending money to its members or such other societies as are mentioned in the objects and that when it lays out its moneys so that they may be readily available to meet the demand of its depositors if and when they arise, it is not a legitimate mode of carrying on of its banking business. The Privy Council in 1940-8 ITR 635 == (AIR 1940 PC 230) where the profits arose from the sale of Government securities pointed out at page 645 (of ITR): (at p. 236 of AIR), that in the ordinary cases the business of a bank essentially consists of dealing with money and credit. Depositors put their money in the bank at a small rate of interest and in order to meet their demands if and when they arise the bank has always to keep sufficient cash or easily realisable securities. That is a normal step in the carrying on of the banking business. In other words, that is an act done in what is truly the carrying on or carrying out of a business . It may be idded that another mode of conducting business of a bank is to place its fund in deposit with other banks and that also is to meet demands which may be made on it. " ( 10 ) AS I read the decision in Bihar State Co-operative Bank s case, Alr 1960 SC 789, the ratio appears to be that the activity in question there was termed as a normal step in carrying on of the banking business In other words, according to the decision of their Lordships, only-such income as arises in the course of carrying on of a business can be taxed under lection 10. In this case it has been found as a fact by the Income-tax Appellate Tribunal that the moneys were not deposited as a part of its money-lending activity Apart from that. it is difficult to accept that the assessee would lend money to bank as a part of its money- lending business. The findings of fact arrived at by the Tribunal run counter to the suggestion that depositing money in banks was a normal mode of the assessee s business. Under the circumstances of this case, therefore, it cannot be said that the income arose out of the carrying on or carrying out of the assessee s business. In my opinion, therefore, the income was rightly taxed under section 12. I would, therefore, answer the first question in the affirmative and against the assessee. ( 11 ) THE learned counsel for the assessee conceded that in case the first question was answered in favour of the Revenue, the second question would not arise. I would, however, like to express my concurrence with the finding of the Tribunal even on the second question. After the decision had been recorded by the Tribunal an application appears to have been made under section 35 of the Indian Income-tax Act, 1922, whereby it was contended that the Tribunal ought to have decided that when allocating the income of the firm in the hands of the partners it should be treated as business income. The Tribunal, however, found against the assessee. In the Income-tax Act, 1961, section 67 (2) has been introduced, for the first time. This sub-section provides that the share of a partner in the income or loss of a firm should in making the assessment on the partner be apportioned in the various heads in the same manner in which the firms income had been determined. The introduction of this provision, however, does not, to my mind, introduce any change in law so far as the aspect under consideration is concerned. Of course, even under the 1922 Act if the income of a registered firm was assessed under the head business that income would be assessable in the hands of the partners as business income. That would be so because common interest, mutual agency and division of profits are the essential conditions for the existence of a partnership and consequently the partners really carry on business in the name of the firm. That would be so because common interest, mutual agency and division of profits are the essential conditions for the existence of a partnership and consequently the partners really carry on business in the name of the firm. If, on the other hand, the income of the firm consists of income from property it cannot be suggested that such income in the hands of the partners should be treated a business income. My answer to the second question, therefore, would also be in the affirmative and against the assessee. The Revenue will also have the costs of this reference, which I assess at Rs. 250.