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TMI Blog2014 (2) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... share of loss (including unabsorbed depreciation) in the firm M/s. Seva Cold Storage against his other business income as provided in section 70(1) of the I.T. Act,1961. 2. For that Ld CIT(A) should have accepted the assessee's contention that on the facts and circumstances of the case he had been over assessed u/s. 143(1) of the I.T. Act,1961 at total income of Rs. 7,65,180/- and that his correct total Income should have been assessed at Rs. 34,120/-. 3. For that Ld CIT(A) on the facts circumstances of the case should have quashed the assessment order passed u/s 143(3)/147 of the I.T. Act,1961 date 16.09.2010. 4. For that Ld CIT(A) was not justified when he held that "there is no provision for set off loss in partnership firm form income of the partner, overlooking provisions of section 70(1) of the I.T. Act, 1961 which provides for setting off loss of one source against profit in another source; there is no such prohibition." 3. Briefly stated facts are that the assessee is an individual and his sources of income are business and other sources. He has business income from (i) share income from partnership firm (assessee) (a) Seva Cold Storage, (b) Eastern Engineering Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating to amendment of taxation of partnership firm were introduced and the income from the partnership firm was excluded from income of the partner by amending Section 10(2)(a) w.e.f 01.04.1993. Even otherwise, this case law cited refers to carry forward losses of defunct firm which had closed down. Therefore, the case law even otherwise is not applicable in the case of the Appellant as his partnership firm is a going concern. Similarly, with respect to CIT vs. Virmani Indutries Pvt. Ltd. the same is in respect of the method of allowing carry forward of depreciation if there was a change in business of the appellant and the Court hekld that even if there was a change in business the carry forward depreciiton cannot be allowed to set off. The facts in the Appellant's case are totally different as depreciation in the partnership firm has been sought to be set off from the income of the partner i.e. the Appellant. Therefore, from the above, it is accordingly held that the Apellant is not justified in setting off proportionate share of unasborbed depreciation of his partnership firm from his income and it is held that the A.O. was justified in disallowing the same and accordingly the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regards to taxation of firms w.e.f. 01.04.1993 i.e. for and from AY 1993-94 the concept of registered firm was abandoned and it is the same position as a member of AOP or BOI that of the partner of the firm. The profits of partnership firm are itself taxed thereon and whatever remains will be distributed among partners to the extent of proportion of their shares as tax free share. Similar view was discussed by Hon'ble Apex Court in the case of ITO Vs. Ch. Atchaiah (1996) 218 ITR 239 (SC). 5. The relevant case law of Hon'ble Supreme Court in the case of Ch. Atchaiah (supra) has laid down the proposition as under: "In our opinion, the contention urged by Dr. Gauri Shankar merits acceptance. We are of the opinion that under the present Act, the Incometax Officer has no option like the one he had under the 1922 Act. He can, and he must, tax the right person and the right person alone. By "right person", we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression "wrong person" is obviously used as the opposite of the expression "right person". Merely because a wrong person is taxed with respect to a particular income, the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here it is so deductible or payable under any provision of this Act. '' (The amendments made by the aforesaid Amendment Act of 1987 do not make any difference so far as the present controversy is concerned). The expression "person" is defined in clause (31) of section 2 in the following words: " ' person ' includes _ (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. '' A comparison of the provisions of both the enactments immediately brings out the difference between them. Section 3 of the 1922 Act provided that in respect of the total income of a firm or an association of persons, the income-tax shall be charged either on the firm or the association of persons or on the partners of the firm or on the members of the association of persons individually. It is evident that this option was to be exercised by him keeping in view the interests of the Revenue. Whichever course was more advantageous to the Revenue, he was entitled to follow it. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment on it, as if it were a registered firm, if such a course was more beneficial to the Revenue_in the sense that such a course would fetch more tax to the public exchequer. Section 183 read as follows: "183. Assessment of unregistered firm. In the case of an unregistered firm, the Assessing Officer (a) may determine the tax payable by the firm itself on the basis of the total income of the firm, or (b) if, in his opinion, the aggregate amount of the tax payable by the firm, if it were assessed as a registered firm and the tax payable by the partners individually if the firm were so assessed would be greater than the aggregate amount of the tax payable by the firm under clause (a) and the tax which would be payable by the partners individually, may proceed to make the assessment under sub-section (1) of section 182 as if the firm were a registered firm ; and, where the procedure specified in this clause is applied to any unregistered firm, the provisions of subsections (2), (3) and (4) of section 182 shall apply thereto as they apply in relation to a registered firm." It may be mentioned that section 183 corresponded to section 23(5)(b) of the 1922 Act. The 1922 Act not only p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. Palkhivala, who was specifically appointed as a member for the purpose of revision of the Income-tax Act. [Extracts are taken from the XIIth Report of the Law Commission of India, published by the Government of India, Ministry of Law]. This question has also been troubling the High Courts in the country. As a matter of fact, the Patna and Andhra Pradesh High Courts have taken different views. Be that as it may, we may mention that the Patna High Court in Mahendra Kumar Agrawalla v. ITO [1976] 103 ITR 688, the Punjab and Haryana High Court in Rodamal Lalchand v. CIT [1977] 109 ITR 7, the Andhra Pradesh High Court in Choudry's case [1986] 158 ITR 224 and the Delhi High Court in Punjab Cloth Stores v. CIT [1980] 121 ITR 604 have taken the view which we have taken. On the other hand, the Madras High Court in CIT v. Blue Mountain Engineering Corporation [1978] 112 ITR 839 and the Patna High Court in its earlier decision in CIT v. Pure Nichitpur Colliery Co. [1975] 101 ITR 79 have taken the opposite view. The Andhra Pradesh High Court first expressed the other view, then in Choudry's case [1986] 158 ITR 224 (AP), it took the view which we have taken and then again in B. R. Construct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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