1992 (7) TMI 13 - HC - Income Tax

Summary

Issues Involved:
1. Right of appeal under section 246(c) read with section 247 of the Income-tax Act, 1961.
2. Justification for the Appellate Assistant Commissioner to entertain the appeal filed by a partner of the firm.

Issue-wise Detailed Analysis:

Issue 1: Right of Appeal under Section 246(c) read with Section 247

The first issue revolves around whether a partner of an unregistered firm has the right to appeal against the apportionment of the firm's income under section 246(c) read with section 247 of the Income-tax Act, 1961. The Tribunal had ruled that the partner who objected to the apportionment of her income and tax thereon had a right of appeal because it cannot be that there can be no appeal against the allocation altogether.

The court examined the provisions of section 247, which states that where the partners of a firm are individually assessable on their shares in the total income of the firm, any such partner may appeal against the order of the Income-tax Officer determining the total income or the loss of the firm or the apportionment thereof between the several partners. The court noted that this provision is identical to the second proviso to section 30 of the Indian Income-tax Act, 1922, which also limited the partners' right to appeal to cases where the firm is a registered firm.

The court referred to its previous decision in CIT v. S. K. Basu [1970] 76 ITR 291 (Cal), which held that only the partner of a registered firm is entitled to appeal against the assessment of the firm, including the apportionment of the firm's income amongst the partners. The court also cited the Allahabad High Court's decision in Mohan Lal Khemka v. CIT [1971] 81 ITR 89, which supported the same view.

The court emphasized that the right to appeal is conferred only on a partner who is individually assessable on his share in the total income of the firm. This right is not available when the firm is an unregistered firm. The court further explained that the inclusion of the share income from an unregistered firm in the total income of a partner for rate purposes does not imply that the partner is individually assessable in respect of the shares in the profits of the unregistered firm.

Therefore, the court concluded that the partner of an unregistered firm does not have the right to appeal under section 246(c) read with section 247. The court answered the first question in the negative, in favor of the Revenue and against the assessee.

Issue 2: Justification for the Appellate Assistant Commissioner to Entertain the Appeal

The second issue concerns whether the Appellate Assistant Commissioner was justified in entertaining the appeal filed by one of the partners of the firm, despite the firm's earlier appeal being dismissed as incompetent. The Tribunal had ruled that the appeal by the partner was competent because the apportionment of the total income affected the liability of the partners, and they had the right to appeal against it.

The court, however, found that since the firm was an unregistered firm, the partner did not have the right to appeal under section 246(c) read with section 247. Consequently, the Appellate Assistant Commissioner was not justified in entertaining the appeal filed by the partner.

Given the court's conclusion on the first issue, it deemed the second question superfluous and declined to answer it.

Conclusion:

The court held that the partner of an unregistered firm does not have the right to appeal against the apportionment of the firm's income under section 246(c) read with section 247 of the Income-tax Act, 1961. Consequently, the Appellate Assistant Commissioner was not justified in entertaining the appeal filed by the partner. The court answered the first question in the negative and declined to answer the second question. There was no order as to costs.