1. At the instance of the Revenue, the following common question in respect of the two assessment years 1973-74 and 1974-75 has been referred to this Court:

"Whether, ob the facts and in the circumstances of the case, the assessee is entitled to be assessed under S.161 (1) of the Income-tax Act, 1961?"

2. The facts leading to the reference are as follows: The firm 'Messers. V. S. Kumaraswamy Reddiar' had been engaged in business in piece goods. The constitution of the firm had undergone changes from time to time. As on 16-8-1971, the firm, constituted under the partnership deed executed on that day, consisted of four partners, Kumara Swamy Reddiar, Nagaraja Reddiar, Radhakrishna Reddiar and Kannan.

3. It appears that some time in 1972 the partners had discussions regarding the manner in which the business should be conducted in future. The result of such discussions is evidenced by the agreement dated 30-3-1972 which is Annexure B to the reference. H recites an agreement for the transfer of the business of Messrs. V. S. Kumaraswamy Reddiar to Sri V. S. Kumaraswamy Reddiar and Sri. K. Nagaraja Reddiar "who have agreed to constitute a trust effective from the 1st day of Apri