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Issues Involved:
1. Jurisdiction of the Income-tax Officer, Meerut, to make the assessment. 2. Correctness of the amount treated as the assessee's share in the Calcutta firm. 3. Exemption from income-tax under Section 14(2)(b) of the Indian Income-tax Act. Detailed Analysis: Issue 1: Jurisdiction of the Income-tax Officer, Meerut The first issue concerns whether the Income-tax Officer, Meerut, had jurisdiction to make the assessment. The assessee argued on two grounds: a technicality regarding the designation of the officer and the geographical location of the business. Technicality Argument: The Income-tax Officer signed as the Income-tax Officer, Meerut, rather than the Additional Income-tax Officer. A notification under Sec. 5(4) of the Income-tax Act appointed an Additional Income-tax Officer for the Meerut circle. The appellate order conceded the official who made the assessment was indeed the Additional Income-tax Officer. The court held that the incorrect designation did not divest the officer of his jurisdiction. Geographical Argument: The assessee contended that since the business was in Calcutta, the assessment should have been made there. Clause (1) of Sec. 64 states that an assessee should be assessed where the principal place of business is located. Clause (2) states that in other cases, the assessment should be where the assessee resides. Clause (3) provides that any jurisdictional question should be determined by the Commissioner. The court noted that no jurisdictional question was raised during the assessment, and thus, the provisions of clause (3) did not apply post-assessment. The court concluded that the assessee could not object to the jurisdiction after the assessment order was made and that the question of jurisdiction could not be raised in the appeal. The analogy with civil litigation did not help the assessee, as objections to jurisdiction must be raised at the earliest opportunity. Issue 2: Correctness of the Amount Treated as the Assessee's Share The second issue was whether the amount of Rs. 51,180 had been correctly treated as the assessee's share in the Calcutta firm. The court found that the interest payable to the partners was income of the firm and was correctly treated as such by the Income-tax Officer at Calcutta. The interest paid was essentially an allocation of the profits of the firm. The court rejected the argument that since the money was assessed as income from the business of the firm, it could not be assessed again in the hands of the partner. The sum of Rs. 51,180 was deemed profits accruing personally to the assessee from his investment in the firm. The court held that the amount was correctly treated as the assessee's share for the assessment year in dispute. Issue 3: Exemption from Income-tax under Section 14(2)(b) The third issue was whether the amount was exempt from income-tax under Sec. 14(2)(b). Sec. 14(2)(b) exempts the proportionate share of profits of any firm that has been assessed to income-tax. Since the firm at Calcutta suffered a net loss and was not assessed to income-tax, the exemption did not apply. The court clarified that "to assess to income-tax" means "to ascertain or calculate the income-tax payable." Therefore, the assessee was not entitled to exemption under this section. Conclusion: 1. The assessee was not competent to ask the Commissioner of Income-tax to state a case on the question of jurisdiction. 2. The amount of Rs. 51,180 was correctly treated as the assessee's share in the Calcutta firm for the assessment year in dispute. 3. The amount was not exempt from income-tax under Sec. 14(2)(b). Per Curiam: The answers to the questions referred were: - Question (a): The assessee was not competent to ask the Commissioner of Income-tax to state a case on the question of jurisdiction. - Question (b): Answered in the affirmative. - Question (c): Answered in the negative. The judgment was sent to the Commissioner of Income-tax, and the assessee was ordered to pay the costs of the reference.
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