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TMI Blog1969 (1) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... rem Narain, each acting as a karta of his Hindu undivided family. The said partnership owned three factories, namely, (1) Prag Distilled Water Ice Factory, (2) Prag Cold Storage, and (3) Prem Raj Enamel Metal Factory. The firm carried on business up to January 1, 1955. Prag Distilled Water Ice Factory and Prag Cold Storage suffered losses of Rs. 2,12,027 and Rs. 1,02,481 respectively up to the end of the assessment year 1955-56 which were carried forward and the carried forward loss was Rs. 3,53,838 in the assessment of the said registered partnership for the assessment year 1955-56 comprising of Rs. 3,14,508 in the aforementioned two factories and Rs. 39,330 in Prem Raj Enamel Metal Factory. This loss was allocated equally between the two partners so that the carried forward loss in the hands of each partner was Rs. 1,76,919. The partnership firm was dissolved on January 1, 1955. On the same date, the three factories were valued by the partners with the help of experts and divided into two lots. The lot comprising Prag Distilled Water Ice factory as a going concern together with its assets and liabilities except goodwill and land and Prag Cold Storage also as a going concern toget ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation the Tribunal upheld the view of the Income-tax Officer. It principally relied on In the matter of M/s. Chouthmal Golapchand, and a decision of the Nagpur High Court in Commissioner of Income-tax v. Seth Mathuradas Mohta. In fact, the Tribunal was of the opinion that Mohta's case completely covered the present case. Regarding the carry forward of losses, the Tribunal decided that with respect to the losses other than unabsorbed depreciation, if any, included in the carried forward losses, both the conditions of section 24(2) stood satisfied inasmuch as (1) the two businesses in which the losses were originally sustained continued to be carried on by the assessee in the previous year relevant to the assessment year in question ; and (2) in the circumstances, the assessee, who was a partner in the erstwhile firm, must be held to have sustained the loss in business in the preceding year. On the construction of section 24(2) of the said Act the Tribunal was of the view that a loss that could be carried forward to the following year under section 24(2) should not contain any element of unabsorbed depreciation which depreciation could be carried farward only in the manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,76,691 is a carried forward loss. Even in the case of unabsorbed depreciation it could have legitimately been described by the Income-tax Officer as carried forward loss. Unabsorbed depreciation is one of the items to be deducted in computing the profits under section 10(2). Unabsorbed depreciation is under section 10(2)(vi), proviso (b), also to be carried forward and "added to the amount of the allowance for depreciation in the following year and deemed to be part of that allowance, or if there is no such allowance for that year, be deemed to be the allowance for that year and so on for the succeeding year". Section 10(2) makes no distinction between the different allowances, mentioned therein. All these allowances are, as I have said, deductible in computing the profits and gains of business. It is true that section 24(2) deals with carry forward of losses other than losses on account of depreciation and that is so because the carry forward of depreciation has been provided in section 10(2)(vi), yet only the manner of carry forward in the two provisions is different and both types of deductions could appropriately be termed, as was done by the Income-tax Officer, as carry for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he intention of the legislature that effect can be given to a depreciation allowance in the assessment of a partner. In such a case set off is permitted under section 24(1) and recourse to section 24(2) is unnecessary. In that view, even the condition prescribed in clause (ii) of sub-section (2) of section 24 that the business, profession or vocation, in which the loss was originally sustained, should continue to be carried on, may also not be necessary because carry forward of depreciation is not covered by section 24(2). To that extent, the Tribunal seems to have erred in coming to the conclusion regarding carry forward of unabsorbed depreciation. As I have already said, that matter is not before me and, therefore, I need not finally decide that question. Mr. Bajaj, the learned counsel for the assessee, strongly impressed on us the necessity of upsetting the decision Tribunal on the question of carry forward of unabsorbed depreciation. This contention of Mr. Bajaj overlooks the fact that the assessee is not before us in appeal and we are only exercising advisory jurisdiction. No question having been referred to us on this aspect, I cannot concede to Mr. Bajaj's request. My view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous to say that in the former the cost of the houses would be the cost actually paid by the third party purchaser and in the latter the cost of the houses would not be the price for which they were auctioned but the nominal price they bore in a remote past. Other illustrations may be visualized. Barring the cases of fraud, collusion and inflation and deflation of values for ulterior purposes, cost of an asset to a divided member must necessarily be its cost to him at the time of partition, whether mentioned in the partition deed or ascertained aliunde." and expressed dissent with the view taken by the Nagpur High Court in Mohta's case. A partner is owner of the entire partnership assets. As held by the Tribunal, the valuation of the property was not notional but real and that was the basis for allocating properties to different partners. Adjustment was made by payment of Rs. 4,35,000 in cash by the assessee to the other partner with a view to equalising their shares. In the circumstances, the cost of the property to the assessee on the date of the partition would be the value given to it for the purposes of allotment. My answer to the second question, therefore, is in the affi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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