1979 (5) TMI 30 - AT - Income Tax

Summary

Issues:
- Disallowance of share of loss arising from work of M/s Dularam D. Thakur
- Treatment of loss in M/s Balaram D. Thakar Work Account
- Assessment of share from Association of Persons (AOP)
- Disallowance of loss claimed by assessee in individual capacity

Analysis:
The judgment pertains to an appeal by the assessee for the assessment year 1975-76 concerning the disallowance of the share of loss of Rs. 5,665 arising from the work of M/s Dularam D. Thakur. The assessee's income sources include share income from firms for the relevant previous year, which corresponds to the period prior to the assessment year under consideration. The dispute arose from the treatment of profit and loss pertaining to the pending work of an old firm and the sale of a plot of land owned by the firm. The ITO disallowed the claimed loss on the grounds that it should be filed by the assessee and others as an Association of Persons (AOP) or a Unit of Assessment (URF).

In the first appeal before the AAC, the disallowance was upheld based on the ITO's decision. The assessee contended that the loss in the contract business should have been allowed, given the treatment of the capital gain from the sale of the plot of land. The assessee argued that once the ITO assessed the capital gain as per the retirement deed of the old firm, he should not have disallowed the loss from the contract work. The assessee's appeal was based on the interpretation of relevant legal provisions and relied on a Supreme Court decision to support their position.

The Tribunal, after considering the arguments presented, held that the ITO was not justified in disallowing the loss to the assessee from the AOP once he had assessed the share from the AOP in relation to the capital gain on the plot of land. The Tribunal found that the ITO did not assess the claim of the assessee regarding the loss from the AOP on its merits but merely rejected it on procedural grounds. Consequently, the Tribunal directed the matter to be reconsidered by the ITO to determine the admissibility of the loss from the contract work in the name of M/s Balaram D. Thakar after thorough verification and assessment on merit.

As a result, the assessee's appeal was treated as allowed for statistical purposes, indicating a favorable outcome for the assessee in terms of the appeal being restored for further assessment by the tax authorities.