DIPAK KUMAR SEN, J.

( 1 ) IN the assessment year 1966-67, the accounting year ending on March 31, 1966, the assets of the firm, Nirsa Refractory and Ceramic Works, Calcutta, were transferred to a limited company, viz. , Nirsa Refractory and Ceramic Works Private Ltd. , for a consideration of Rs. 3 lakhs. Rupees 1,60,000 of the consideration was allocated towards plant, machinery, electric motors, etc. , and the balance Rs. 1,40,000 was allocated towards consideration for a leasehold land belonging to the firm. Capital gains arising as a result of the transfer of the properties apart from the land was included in the income of the firm in its income-tax assessment in the said assessment year and was taxed. Thereafter, the capital gain which was determined to be Rs. 1,31,676 was allocated between the two partners.

( 2 ) IN the income-tax assessment of H. S. Mukherjee, one of the partners and the assessee, the Income-tax Officer included half of the said capital gains and levied tax on the same under Section 114 of the Income-tax Act, 1961, as prevailing in the said year at the minimum rate of 15%.

( 3 ) BEING aggrieved, the assessee preferred an appeal from the said assessment to the Appellate Assistant Commissioner. It was contended in the appeal that the tax on capital gains in the relevant assessment year should in no case exceed 15% of the net gains and as tax at the said rate has been imposed on the firm, the same could not be assessed further in the hands of the partners under Section 114 of the Act. It was further contended that the partners being the real owners of the property, capital gains should have been assessed in their hands and not in the hands of the firm. It was contended, in the alternative, that if such capital gains were taxed in the hands of the firm, the same could not be assessed in the hands of the partners.

( 4 ) THE Appellate Assistant Commissioner held that the firm and the partners were separate entities and distinct assessees under the Income-tax Act. He held further that under Section67 (2) of the Income-tax Act, 1961, income of a firm had to be allocated among its partners under the various heads in the same manner in which income had been determined in the case of the firm and, therefore, capital gains had to be assessed both in the hands of the firm and also in the hands of the partners. Section 67 itself provided for double taxation in such cases. The contention of the assessee was rejected.

( 5 ) BEING aggrieved, the assessee preferred a further appeal before the Income-tax Appellate Tribunal. The contentions made before the Appellate Assistant Commissioner were reiterated before the Tribunal. The Tribunal held that under Section 182 of the Income-tax Act, 1961, income-tax payable by a registered firm had to be determined and, thereafter, the share of each partner in the income of the firm had to be included in the partner's total income and assessed to tax. Though there was double taxation, the Legislature having provided for the same in the Act, capital gains in the instant case had to be assessed in the hands of the partners also. The appeal of the assessee was dismissed.

( 6 ) ON an application of the assessee under Section 256 (1) of the Income-tax Act, 1961, the following question has been referred by the Tribunal as a question of law arising out of its order for the opinion of this court : "whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the tax in the hands of the assessee in respect of his share of capital gains according to the provisions of Section 114 of the Income-tax Act, 1961, when tax on capital gains had already been charged in the hands of the registered firm where the assessee was a partner. "

( 7 ) AT the hearing of this reference, learned advocate for the assessee submitted that tax on capital gains was a special tax imposed by the Income-tax Act and was distinct from other income-tax as such inasmuch as the same was c

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