1983 (10) TMI 22 - HC - Income Tax

Summary

Issues: Whether the assessee-firm was entitled to relief under s. 84 of the Income-tax Act, 1961, even though similar relief was allowed to the partners in their individual assessments.

Analysis:
The judgment of the Bombay High Court addressed the issue of whether an assessee-firm was entitled to relief under s. 84 of the Income-tax Act, 1961, despite the fact that similar relief had been granted to the partners in their individual assessments. The assessee, a partnership firm with three partners, had established a new industrial undertaking in the relevant accounting year. The Income Tax Officer (ITO) allowed partial exemption under s. 84 to the partners but not to the firm without providing any reasons for the discrepancy. The assessee appealed, and the Appellate Assistant Commissioner (AAC) granted relief under s. 84 to the firm based on the judgment of the Gujarat High Court in CIT v. Arun Industries [1966] 61 ITR 241. The Tribunal also upheld the AAC's decision, leading to the Revenue appealing to the High Court.

The Gujarat High Court's decision in Arun Industries' case established that a registered firm and its partners are distinct assessees entitled to claim exemption under s. 15C(1) of the Indian I.T. Act, 1922. Similarly, the Allahabad High Court in CIT v. Bharat Bhandar [1974] 94 ITR 315 held that relief under s. 84 should be allowed to the registered firm, even if exemption had been granted to individual partners. The Central Board of Direct Taxes accepted this interpretation through Circular No. 123 dated October 31, 1973, applying it to all cases under s. 15C of the 1922 Act and s. 84 of the current Act. The Delhi High Court in CIT v. Ramlal Rajgharia & Sons [1980] 123 ITR 1 also supported this view, affirming that partners' share of income from a firm's industrial undertaking could be eligible for s. 84 exemption.

The Bombay High Court, following the reasoning of the aforementioned judgments, concluded that the assessee-firm was indeed entitled to relief under s. 84, despite the partners already receiving such relief. Therefore, the question posed was answered in the affirmative, in favor of the assessee. The judgment highlighted the distinct nature of a registered firm and its partners as separate assessees, each eligible for relief under the Income-tax Act, 1961.