VEERASWAMI C. J.

These are two consolidated references relating to the assessment years 1959-60 to 1961-62 in one case and to the last two years in the other. When they came up before a Division Bench, to which one of us was a party, it was felt that Mathew Abraham v. Commissioner of Income-tax required reconsideration and they have been placed before us. The common question for decision in the references under section 66(1) of the Indian Income-tax Act, 1922, is Whether the sums of Rs. 10, 045 in each of the two years received by Thangavelu and of Rs. 7, 200, Rs. 10, 578 and Rs. 10, 578 received by Chidambaram in the three years from the two firms have been rightly brought to tax as from other sources under the provisions of the Income-tax Act of 1922 ?

"The assessees were partners in two firms---Kavukal Estates and Tuttapallam Estates---which owned tea estates in the Nilgiris. In addition to their right to share the profits of the firms, the partners were, under the terms of the deed of partnership, entitled each to draw specified salaries for their services to the firms. Till the assessment years ended March 31, 1959, the total income of each firm was computed with reference to section 10(4)(b) which was apportioned between agricultural and business incomes in accordance with rule 24 of the Income-tax Rules. As the firms were registered under the provisions of the Act, the non-agricultural portion of the income was apportioned between the partners and brought to tax in their hands. For the assessment year 1959-60, the Income-tax Officer, being of opinion that the income received by the assessees as salary from the firms would not constitute agricultural income but represented income from other sources, recomputed the income on that basis. As a result, the entire salaries paid to the partners were included in the total chargeable income of each of them. The Appellate Assistant Commissioner of Income-tax did not accept that basis, but proceeded to allow the appeals on the view that since a partner's share of the firm's profits would include any salary earned by him, only 40% of such salary could be taxed in his hands. He did not agree that the immediate source of the income representing the salary was not agricultural land, but, services rendered by the assessees to the firm. By the time the Tribunal disposed of the appeals, Mathew Abraham v. Commissioner of Income-tax had come, which it followed, and allowed the appeals, observing that the partners had nothing to do with agricultural operations, but drew the salaries for services rendered by them to the firms, and that, therefore, rule 24 had no application to themThe Division Bench in its order of reference to a Fuller Bench stated thus" *

The combined effect of sections 10(4)(b) and 16(1)(b) and of rule 24, as it seems to us, is an implied direction that only 40 per cent. of the salary paid but increased or decreased by the share of profit or loss of the business of the firm doing the particular agricultural operation, can be charged to income-tax at the hands of the partners, notwithstanding the fact that the immediate source of the salary is the service to the firm, rather than its business. On this view, Mathew Abraham v. Commissioner of Income-tax may require reconsideration.

"We are of the view that the salary received by a partner of a firm for services rendered by him to it continues to bear, for purpose of charge at his hands the same character as part of the total income of the firm which has been shared between its partners and that the consequence of applying rule 24 to the total income of the firm computed in accordance with section 10(4)(b) is necessarily that only 40 per cent. of the salary as referable to agricultural income can be taken as salary in computing the total income of a partner of a firm in terms of section 16(1)(b). This view seems to us to be supported not only by the relative provisions of the Income-tax Act, but is in accord with t