1983 (4) TMI 122 - AT - Income Tax

Summary

Issues:
1. Dispute regarding the claim of the assessee for carry forward and set off of loss of past years.
2. Whether the half share of profit or loss entitled to the assessee by overriding title can be considered as income derived from business carried on by the assessee.
3. Interpretation of section 72(1) of the Income-tax Act, 1961 in relation to the entitlement of the assessee to carry forward and set off the loss.

Analysis:
1. The judgment pertains to an appeal by the assessee regarding income-tax assessment for the year 1978-79, specifically concerning the claim for carry forward and set off of loss from past years. The dispute revolves around the entitlement of the assessee to half share of profit or loss arising from firms in which the assessee's father was a partner and to which the assessee is entitled by overriding title due to a partition. The background facts establish the entitlement of the assessee to half share of profit or loss in various firms based on previous decisions and orders of the Tribunal and the Madras High Court.

2. The primary issue in the appeal is whether the half share of profit or loss, which the assessee is entitled to by overriding title, can be considered as income derived from business carried on by the assessee. The department disallowed the claim on the grounds that such share does not constitute income from the assessee's business. The Commissioner (Appeals) upheld this decision, leading to the current appeal. The assessee argues that the share income allocated to the father in the firms represents business income, even though the entitlement arises from a partition, not a sub-partnership.

3. The interpretation of section 72(1) of the Income-tax Act, 1961 is crucial in determining whether the loss carried forward by the assessee can be set off against profits and gains of any business carried on by the assessee. The department contends that the entitlement based on overriding title does not constitute profits and gains of the assessee's business. However, the Tribunal finds merit in the assessee's claim, citing established legal principles that share of profit in firms represents income from business carried on by the partner. The judgment references relevant case laws and legal provisions to support the conclusion that the half share of income or loss allocated to the assessee should be treated as income from business carried on by the assessee, allowing for the carry forward and set off of the loss as per the provisions of the Act.

In conclusion, the Tribunal allows the appeal, directing the department to carry forward the loss and set off in accordance with the law, based on the characterization of the share income as profits and gains of business carried on by the assessee.