Y. V. ANJANEYULU, J.

( 1 ) THIS is a reference under section 256 (1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), by the Income-tax Appellate Tribunal in connection with the assessment year 1977-78. The following question of law is referred for the consideration of this court :"whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the principle of mutuality is satisfied in the case of the assessee-firm and consequently the income of Rs. 48,310 is not taxable for the assessment year 1977-78 ?"

( 2 ) THE assessee describes itself as a firm registered for income-tax purposes. It carries on business in lending money, somewhat unusually, to its partners. Although it is not clear from the record, it is clear that this firm has been carrying on this so-called business for quite some time, because there is an indication that the firm was assessed to tax up to and including the assessment year 1976-77 and tax was paid by the former partners. In the previous year relevant to the assessment year 1977-78, some changes occurred in the constitution of the firm, with the result that a deed of partnership was exec

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