1992 (7) TMI 45 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 3(1)(f) of the Income-tax Act, 1961.
2. Applicability of section 3(1)(f) to determine the previous year for an assessee who is a partner in a firm.
3. Conflict between section 3(1)(b) and section 3(1)(f) in determining the previous year for assessment.

Analysis:
The High Court of Orissa was moved by the assessee under section 256(2) of the Income-tax Act, 1961, to address the question of whether the Income-tax Appellate Tribunal was correct in applying the provisions of section 3(1)(f) to the case. The dispute arose from the assessment of the assessee, who was a partner in a firm, and the determination of the previous year for his income. The Tribunal held that section 3(1)(f) applied, considering the firm's assessment period as the previous year for the assessee's income share. The Revenue argued that the firm's accounting period should prevail for the partner under section 3(1)(f), while the assessee contended that his option under section 3(1)(b) should be respected.

The Court analyzed the provisions of section 3(1)(f) and its application to partners in assessed firms. It distinguished the general nature of section 3(1)(b), allowing an assessee to choose the previous year, from the specific application of section 3(1)(f) to partners in assessed firms. The Court highlighted that section 3(1)(f) mandates the firm's assessment period as the partner's previous year for income share, even if the partner has income from other sources with different previous years. The decision was supported by precedents from the Kerala High Court and the Bombay High Court, confirming the statutory preference of the firm's assessment period under section 3(1)(f).

Considering the arguments and legal provisions, the Court upheld the Tribunal's decision that section 3(1)(f) was correctly applied to the case. The judgment favored the Revenue, holding that the firm's assessment period should prevail for the partner's income determination. The Court's conclusion was in the negative, supporting the application of section 3(1)(f) in this scenario. The judgment was agreed upon by both Judges and the reference was disposed of without costs.