1977 (8) TMI 47 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to set off one-fourth share of losses of the assessee's father in the firms.
2. Entitlement to claim a set-off of the losses suffered by the assessee's father for the assessment year 1958-59.

Detailed Analysis:

Issue 1: Entitlement to set off one-fourth share of losses of the assessee's father in the firms

The primary question was whether the assessee could set off one-fourth of his father's losses in the firms in question. The Tribunal concluded that the assessee was entitled to this set-off under section 24(2)(iii)(e) of the Indian Income-tax Act, 1922. The Income-tax Officer initially rejected this claim, arguing that the assessee became a partner by choice, not by inheritance, and thus was not eligible for the set-off. However, the Tribunal accepted the assessee's contention, supported by the precedent set in Commissioner of Income-tax v. Bai Maniben [1960] 38 ITR 80 (Bom), which held that inheritance allowed for such a set-off. The Tribunal noted that the revenue did not challenge similar set-offs granted to the assessee's brothers, thereby upholding the assessee's claim.

Issue 2: Entitlement to claim a set-off of the losses suffered by the assessee's father for the assessment year 1958-59

The second issue was whether the assessee could claim a set-off for the losses incurred by his father for the assessment year 1958-59. The Tribunal upheld the assessee's claim, referencing section 24(2)(iii)(e) of the Act, which allows for the set-off of losses if the business is succeeded by inheritance. The Tribunal found that the assessee succeeded his father's share by inheritance, as evidenced by the partnership agreements. The agreements indicated that the surviving partners decided to continue the partnership by including the heirs of the deceased partner. This decision was consistent with the precedent in Bai Maniben's case, where the court upheld a similar set-off claim based on inheritance. Consequently, the Tribunal concluded that the assessee was entitled to the set-off for the losses incurred by his father.

Conclusion:

The court answered both questions in the affirmative, affirming the Tribunal's decision that the assessee was entitled to set off one-fourth of his father's losses and claim the set-off for the losses incurred in the assessment year 1958-59. The revenue was ordered to pay the costs of the assessee.