Dipak Kumar Sen, J.
1. Satya Dulal Singha, the assessee, had been carrying on business in partnership with his brother, Satya Gopal Singha, till May 21, 1971.
2. While in partnership, the assessee and his brother transferred Rs. 40,000 each, aggregating Rs. 80,000, to their widowed mother and their unmarried sisters. The said amount was, however, retained by the partnership.
3. On May 21, 1971, Satya Gopal Singha, the brother of the assessee, retired from the firm, the firm was dissolved and the business of the firm was taken over by the assessee as the sole proprietor. The said sum of Rs. 80,000 remained deposited in the business.
4. For the assessment year 1973-74, the corresponding accounting year ending on June 30, 1972, the assessee was assessed to income-tax. A sum of Rs. 6,000 was credited by the assessee in the said assessment year to his mother and unmarried sisters by way of interest on the said Rs. 80,000. The assessee claimed deduction of the said Rs. 6,000 in the computation of his taxable income. The claim was disallowed by the Income-tax Officer.
5. On appeal, the Appellate Assistant Commissioner confirmed the disallowance and on further appeal by the assessee, the Income-tax Appellate Tribunal also upheld the disallowance on the ground that the assessee could not produce evidence to show that he was required to pay interest on the deposit or that the money was really required for business purposes of the assessee or that there was any agreement to pay such interest.
6. On an application by the assessee under Section 256(2) of the Income-tax Act, 1961, the Tribunal was directed by this court to refer the following questions, as questions of law arising from the order of the Tribunal, for the opinion of this court;
'(1) Whether, on the facts and in the circumstances of the case, an agreement to pay interest on the sum of Rs. 80,000 (Rupees eighty thousand) only to the widowed mother and three sisters was implied ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in confirming the disallowance of Rs. 6,000 (Rupees six thousand)?'
7. The learned advocates for the parties in their respective submissions before us reiterated the contentions raised in the proceedings below.
8. It appears to us that an important aspect of the matter has been overlooked throughout. It is not in dispute that the amount of Rs. 80,000 was transferred to the widowed mother and the unmarried sisters of the assessee and that this amount remained first in the firm comprised of by the assessee and his brother. Thereafter, following the retirement of the brother of the assessee, the amount continued to remain in deposit in the business of the assessee to the credit of the donees.
9. Even if we accept the case of the Revenue that there was no agreement between the assessee and the donees whereby the said amount was lent to the assessee on interest or that there is no evidence that the assessee in fact used the said amount in his business, on the facts as found, the conclusion is inescapable that the assessee held the money for the benefit of his widowed mother and unmarried sisters in a fiduciary capacity and a constructive trust arises in favour of the latter under the relevant provisions of the Indian Trusts Act, 1882.
10. The assessee undoubtedly had the benefit of the said amount and the right of user thereof in his business where the amount was retained and the assessee became liable to the beneficiaries to account for the advantages received by reason of the user of the said amount.
11. For the reasons aforesaid, we do not give any answer to the questions referred and remand the matter to the Tribunal for being considered afresh in the light of the above observations. If necessary, the Tribunal will permit the parties to adduce further evidence.
G.N. Ray, J.
12. I agree.