1982 (11) TMI 72 - AT - Income Tax

Summary

Issues:
1. Whether the loss of a registered firm should be distributed among the partners and adjusted in their assessments.
2. Whether a return filed under section 139(4) after a notice under section 148 can be considered as filed under section 139.
3. Whether the provisions of section 80 apply to the apportionment of loss in the case of a registered firm.
4. Whether the inter se set off of apportioned loss among partners is permissible.
5. Whether the loss determined in the firm's case can be carried forward for set off in subsequent years.

Analysis:
1. The case involved an appeal by the department regarding the distribution of loss among partners of a registered firm. The firm did not file a return of income voluntarily within the specified time, leading to the initiation of proceedings under section 147. The Income Tax Officer (ITO) determined a total loss for the firm, but did not apportion it among the partners initially. The Commissioner of Income Tax (Appeals) directed the ITO to distribute the loss among the partners, which the department contested based on section 80 provisions. However, the Tribunal upheld the CIT(A)'s decision, citing section 75 that mandates the apportionment of loss among partners of a registered firm.
2. The issue arose whether a return filed under section 139(4) after a notice under section 148 could be considered as filed under section 139. The department argued that the return filed post-notice should not be treated as voluntarily filed under section 139, thus affecting the carry forward of losses. The Tribunal disagreed, stating that the return should be construed as filed under section 139, and the bar in section 80 did not apply to apportionment of loss in a registered firm.
3. The applicability of section 80 to the apportionment of loss in a registered firm was debated. The department contended that section 80 prohibited the carry forward of loss unless specific conditions were met. However, the Tribunal clarified that section 80 did not apply to registered firms as section 75 mandated the apportionment of loss among partners. Therefore, the Tribunal upheld the CIT(A)'s direction to apportion the loss among partners.
4. The question of inter se set off of apportioned loss among partners was raised. The department argued against allowing such set off, citing section 80 provisions. However, the Tribunal held that inter se set off of apportioned loss among partners was permissible, especially in cases of first assessment under section 147.
5. Lastly, the issue of carrying forward the loss determined in the firm's case for set off in subsequent years was discussed. The Tribunal clarified that since the return was not filed under section 139, the bar in section 80 applied, preventing the carry forward of losses for future set off. The Tribunal emphasized that the loss computed in the firm's case could not be carried forward to subsequent years for set off.

In conclusion, the Tribunal dismissed the appeals by the revenue and cross objections seeking to uphold the CIT(A)'s order regarding the distribution and apportionment of loss among partners of the registered firm. The Tribunal held that the provisions of section 75 mandated the apportionment of loss among partners and that section 80 did not apply to registered firms in this context.