1995 (5) TMI 85 - AT - Income Tax

Summary

Issues:
1. Interpretation of section 143(1)(a) regarding adjustments made by the Assessing Officer.
2. Application of section 182(3) in relation to tax assessment on share income from registered firms.
3. Analysis of section 143(1A) and its applicability to additional tax levied on adjustments.
4. Determination of tax liability on non-resident partners as per section 182(3).

Analysis:
The judgment by the Appellate Tribunal ITAT MADRAS-B involved appeals by non-resident assessees against the adjustments made by the Assessing Officer regarding their share income from two firms. The assessees contended that the tax on this income was paid by the firms as per section 182(3) and thus was not required to be included in their returns. However, the Assessing Officer included the share income under section 143(1)(a) and levied additional tax under section 143(1A, which was upheld by the CIT(A).

The first issue addressed was whether the adjustments made fell within the scope of section 143(1)(a). The Tribunal rejected the assessees' claim that the Circular No. 689 of the CBDT was not considered by the Assessing Officer, stating that adjustments due to incorrect claims could be made based on existing information in the returns.

Next, the Tribunal analyzed the provisions of section 182(1) and (3) in relation to the tax assessment on share income from registered firms. It concluded that the share of each partner, including non-resident partners, should be included in total income and assessed to tax, with the tax on non-resident partners' share being assessed on the firm and paid by the firm.

Regarding section 143(1A), the Tribunal noted that the additional tax is to be levied only with reference to adjustments under section 143(1)(a) and not under section 143(1)(c). It highlighted that the tax liability should attract additional tax, and since the tax on the income from the firms was payable by the firms and not the assessees, no additional tax should be levied.

Lastly, the Tribunal clarified the computation of tax on non-resident partners as per section 182(3), emphasizing that the tax payable by the assessees should be demanded from the firms, with credit given for tax paid by the firms. The appeals were treated as allowed in part for statistical purposes, indicating a partial success for the assessees in challenging the adjustments and additional tax levied.