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Commissioner of Income-tax Vs. Brij Raman Das - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 56 of 1978
Judge
Reported in(1979)9CTR(All)50; [1979]118ITR397(All)
ActsIncome Tax Act, 1961 - Sections 67(2) and 80L
AppellantCommissioner of Income-tax
RespondentBrij Raman Das
Appellant AdvocateAshok Gupta, Adv.
Respondent AdvocateK.B. Bhatnagar, Adv.
Excerpt:
- - the revenue went up in appeal to the tribunal but failed......income in the same manner in which the income or loss of the firm has been determined under each head of income.'5. it is evident that sub-section (2) provides for the carrying over of the allotted share of income of each partner under the same head under which it was determined in the case of the partnership-firm, e.g., if interest income was earned by a partnership firm, the share allocable to each partner would be carried over to his individual assessment as income from interest. thus, the income under each head will retain its character as such even though it is assessed all over again in the hands of the individual partner. the process of allocation of the income to the hands of the partner does not and cannot, by virtue of section 67(2), change the head under which it was.....
Judgment:

Satish Chandra, C.J.

1. Messrs. Purshottam Das Rais, Gorakhpur, was a registered partnership firm. For the assessment year 1974-75, it derived income from interest. The income from interest accrued because the firm made fixed deposits with certain banks or in savings bank accounts. In due course, the firm was assessed and the share of each partner allocated. The assessee, in the present case, is one of the partners. He claimed relief under Section 80L of the I.T. Act, 1961, in respect of the interest income. This claim was repelled by the ITO but was accepted on appeal. The revenue went up in appeal to the Tribunal but failed. The claim of the assessee was upheld by the Tribunal.

2. At the instance of the CIT, the Tribunal has referred, for our opinion, the following question of law :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that deduction under Section 80L of the Income-tax Act, 1961, was allowable to the assessee in respect of the interest income earned by the firm, Messrs. Purshottam Das Rais, Gorakhpur, part of which was allocated to him under Section 67(2) of the Income-tax Act as his share in the said firm ?'

3. It is not disputed that the assessee's share was allocated to him under Section 67(2) of the I.T. Act, 1961. Section 67 lays down the method of computing a partner's share in the income of the firm. Sub-section (1) provides the actual method of computation of a partner's share in the profits and losses of the firm.

4. Sub-section (2) then provides :

'The share of a partner in the income or loss of the firm, as computed under Sub-section (1) shall, for the purposes of assessment, be apportioned under the various heads of income in the same manner in which the income or loss of the firm has been determined under each head of income.'

5. It is evident that Sub-section (2) provides for the carrying over of the allotted share of income of each partner under the same head under which it was determined in the case of the partnership-firm, e.g., if interest income was earned by a partnership firm, the share allocable to each partner would be carried over to his individual assessment as income from interest. Thus, the income under each head will retain its character as such even though it is assessed all over again in the hands of the individual partner. The process of allocation of the income to the hands of the partner does not and cannot, by virtue of Section 67(2), change the head under which it was determined in the case of the firm. The character of the income will remain the same even in the hands of the partners. Thus, after allocation, the income relating to interest would be taxable under that appropriate head.

6. Section 80L applies to income from interest on certain specified securities or investments. There is no dispute that if this section were applicable, the assessee was entitled to relief under Clause (vi) of Sub-section (1). Section 80L applies to an individual, a HUF or association of persons. It does not apply to a partnership-firm. The assessee was the individual partner. He was being assessed as an individual. He was hence entitled to the benefit of Section 80L, even though the firm may not be so entitled. Since the nature of the income does not change while being assessed in the hands of the partner, the partner as an individual is entitled to the benefit of Section 80L.

7. We, therefore, answer, the question referred to us in the affirmative, infavour of the assessee and against the department. The assessee will beentitled to costs which are assessed at Rs. 200.


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