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Commissioner of Income-tax Vs. Jishan Lal Kuthiala - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference No. 26 of 1969
Judge
Reported in[1972]86ITR680(P& H)
ActsIncome Tax Act, 1922 - Sections 10 and 24(1)
AppellantCommissioner of Income-tax
RespondentJishan Lal Kuthiala
Appellant Advocate D.N. Awasthy and; B.S. Gupta, Advs.
Respondent AdvocateNone
Cases Referred(Cal.) and Ranjit Kr. Banerjee v. Commissioner of Income
Excerpt:
.....amended section 100-a of the code clearly stipulates that where any appeal from an original or appellate decree or order is heard and decided by a single judge of a high court, no further appeal shall lie. even otherwise, the word judgment as defined under section 2(9) means a statement given by a judge on the grounds of a decree or order. thus the contention that against an order passed by a single judge in an appeal filed under section 104 c.p.c., a further appeal lies to a division bench cannot be accepted. the newly incorporated section 100a in clear and specific terms prohibits further appeal against the decree and judgment or order of a single judge to a division bench notwithstanding anything contained in the letters patent. the letters patent which provides for further appeal..........that section 24(1) of the income-tax act, 1922, did not apply to the assessee's case and that the assessee-family was entitled to set off its share of loss in the unregistered firm against its other business income under section 10 of the said act ?'2. the assessee is a hindu undivided family. it derives income from shares held in certain firms, dividend income, etc. the assessee family had 9/16th share in the firm, messrs. r. s. jodhamal kuthiala, new delhi. there is a dispute as to whether this firm was an unregistered or a registered firm, i.e., messrs. r. s. jodhamal kuthiala, new delhi. in the order of the income-tax officer it is described as a registered firm. in the order of the tribunal it is described as an unregistered firm. but, so far as the present case is concerned, it.....
Judgment:

1. At the instance of the Income-tax Appellate Tribunal, Delhi Bench 'C', the following question of law has been referred for our opinion:

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that Section 24(1) of the Income-tax Act, 1922, did not apply to the assessee's case and that the assessee-family was entitled to set off its share of loss in the unregistered firm against its other business income under Section 10 of the said Act ?'

2. The assessee is a Hindu undivided family. It derives income from shares held in certain firms, dividend income, etc. The assessee family had 9/16th share in the firm, Messrs. R. S. Jodhamal Kuthiala, New Delhi. There is a dispute as to whether this firm was an unregistered or a registered firm, i.e., Messrs. R. S. Jodhamal Kuthiala, New Delhi. In the order of the Income-tax Officer it is described as a registered firm. In the order of the Tribunal it is described as an unregistered firm. But, so far as the present case is concerned, it will not make any difference. In the return filed by the Hindu undivided family for the assessment year 1956-57 the assessee declared a loss of Rs. 9,447 regarding the family's share in this partnership business. As the assessment of the firm was still pending at that time, the Income-tax Officer ignored the loss shown by the assessee from this firm and completed assessment of the assessee-family on a total income of Rs. 90,876.

3. Later, the assessee-family filed an application on 9th August, 1962, asking the Income-tax Officer to rectify the assessment order by allowing the loss in the said firm against the assessee's other business income. The Income-tax Officer declined to do so. He took the view that the claim of the assessee was not permissible under Section 24 of the Indian Income-tax Act 1922.

4. The assessee then preferred an appeal to the Appellate Assistant Commissioner and claimed the set-off with regard to the aforesaid loss. The Appellate Assistant Commissioner accepted the assessee's claim and determined the loss incurred by the assessee, Jishan Lal Kuthiala, at Rs. 7,500 and observed that it was open to the Income-tax Officer to rectify the assessment under Section 35(5) after examining the books of the firm.

5. The department preferred an appeal to the Appellate Tribunal against the order of the Appellate Assistant Commissioner. It was contended before the Tribunal that Section 24 is the provision which specifically applies to the question of set-off of loss in computing the aggregate income. According to the department, the assessee was an unregistered firm and loss suffered by it could only be set off against its income, profits and gains and it could not be set-off against income, profits and gains of any partners of the firm. It was further contended that since the loss in question pertained to an unregistered firm, such loss could only be set off against the income of the very unregistered firm and not against the assessee's income. The Appellate Tribunal did not accept the contentions of the department and affirmed the decision of the Appellate Assistant Commissioner basing itself on the decision of the Supreme Court in Commissioner of Income-tax v. P.M. Muthuraman Chettiar, [1962] 44 I.T.R. 710 (S.C.). The Commissioner of Income-tax being dissatisfied with the decision of the Appellate Tribunal applied under Section 256(1) of the Income-tax Act, 1961, requiring it to refer the question of law, already stated, for the opinion of this court. That is how the matter has been placed before us.

6. In our opinion, the matter stands concluded by the Supreme Court decision in Commissioner of Income-tax v. Muthuraman Chettiar. The facts of that case are identical with the facts of the present case. We see no reason to take a view different from the one taken by the Supreme Court. The learned counsel for the department has strongly relied on the decision in Commissioner of Income-tax v. Gangadhar Nathmal, [1966] 60 I.T.R. 790 (Pat.), Ganga Metal Refining Co. P. Ltd. v. Commissioner of Income-tax, [1968] 67 I.T.R. 771 (Cal.) and Ranjit Kr. Banerjee v. Commissioner of Income-tax, [1968] 69 I.T.R. 32 (Cal.). His main reliance is on the last decision. We have gone through the decision and the others and in our opinion they do not apply to the facts of the present case. It must be remembered that in the present case it is the Hindu undivided family which is being assessed to tax and it is the Hindu undivided family which is claiming the loss suffered by the registered or an unregistered firm. It is not the unregistered firm or its member which is claiming the set-off with regard to loss suffered in a totally different identity. In fact, it was clearly observed by the Supreme Court in P.M. Muthuraman Chettiar's case, while dealing with a similar argument that the case stood covered by Section 24, as follows :

'Though the profits of each distinct business may have to be computed separately, the tax is chargeable under Section 10, not on the separate income of every distinct business, but on the aggregate of the profits of all the businesses carried on by the assessee. Therefore, where the assessee carries on several businesses, he is entitled under Section 10, and not under Section 24(1), to set off losses in one business against profits in another. If Section 24(1) has no application the second proviso thereto can also have no application. Further, the second proviso to Section 24(1) applies only where the assessee is an unregistered firm.'

7. These observations fully cover the present case.

8. For the reasons recorded above, we answer the question referred to us in the affirmative, that is, in favour of the assessee and against the department. As there is no representation for the respondent, there will be no order as to costs.


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