VISWANATHA SASTRI, J. :- The following two questions have been referred to us :

1. Whether in the circumstances of the case, the tribunal was right in upholding the decision of the Income-tax Officer that the profit of the firm should be apportioned between the three present partners and not between the five old partners as claimed by the applicants ?

2. Whether in the alternative, the Tribunal was right in disallowing the sum of Rs. 18,911-12 0 paid to the old partners on the ground that the payment has been made out of the profits earned by the applicant firm ?

The facts which have given rise to this reference have to be briefly stated. V.N.V. Devarajnlu Chetty and Co. a firm of five partners started a wholesale business in piece goods, Indian and foreign, in September 1940. On 31st October 1942, two of the five partners retired from the firm and the three surviving partners thereafter carried on the business under the same name and style as before, but as a new firm. This new firm is the assessee in the case and the applicant for reference to this Court. Each of the two outgoing partners who had a three annas share in the old firm, was paid a sum of Rs. 6399-6-8 for his sh