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TMI Blog1972 (1) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the 1961 Act. The assessee's wife, Mrs. Kapadia, was a partner of three firms in which the assessee was a partner during the three assessment years. When the Income-tax Officer made the assessments, he invoked the provisions of section 16(3) of the 1922 Act for the assessment year 1961-62 and section 64 of the 1961 Act for the assessment years 1962-63 and 1963-64 and included the profits or losses arising to Mrs. Kapadia in the assessment of the assessee. After the completion of the original assessments, the Income-tax Officer became aware of the decision of the Gujarat High Court in Dayalbhai Madhavji Vadera v. Commissioner of Income-tax, wherein it was held that " where the share of the wife or minor child in a firm in which the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the circumstances of the case and on a proper interpretation of section 64 of the Income-tax Act, 1961 the share of the loss of the wife of the assessee in registered firms where the assessee is also a partner could be set off against the income of the assessee while computing the total income ? 2. Whether, on the facts and in the circumstances of the case, the net income of the wife from the various firms in which her husband is also a partner should first be computed before applying the provisions of section 64 of the Income-tax Act, 1961? " Section 64 of the 1961 Act corresponds to section 16(3) of the 1922 Act though they are not identical in terms and the later Act has made some changes. So far as the questions referred for our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power conferred under section 5(8) of the 1922 Act, the Central Board of Revenue issued C.B.R. Circular No. 20 of 1944, C. No. 4(13)--I.T./44, dated the 15th July, 1944, regarding the interpretation of section 16(3)(a) of the 1922 Act. The Board therein has taken the view that " it is a more equitable view to take that loss incurred by the wife or the minor child should be treated as if it were a loss sustained by the individual." The said circular is found at page 225 of volume II of the Income-tax Circulars published by the Central Board of Revenue, Government of India, in 1960. It reads : "C.B.R. Circular No. 20 of 1944. C. No. 4(13)-I.T./44, dated the 15th July, 1944. Subject: Section 16(3)(a)-Loss incurred by wife or minor child-Rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Gujarat High Court in Dayalbhai's case and the view taken is contrary to the instructions given by the then Central Board of Revenue. Under section 5(8) of the 1922 Act and section 119 of the 1961 Act, a circular of the above kind would be binding on all officers and persons employed in the execution of the 1922 Act and the 1961 Act. Vide Navnitlal C. Javeri V. K. K. Sen, Appellate Assistant Commissioner of Income-tax. Though the circular is not binding on the assessee, it was binding on the Income-tax Officer who reopened the assessments. The decision of the Gujarat High Court would have binding force in the State of Gujarat but not outside that State. In the commentary in the Law and Practice of Income-tax by Kanga and Phalkivala, vol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our judgment, the Tribunal was in error in following the decision in Dayalbhai's case when there is a specific circular of the Central Board of Revenue on the subject to the contrary which is binding on the Income-tax Officer. It is relevant to state that the above references were heard by us on December 1, 1971, and at the request of Sri S. R. Rajasekhara Murthy, the learned counsel for the revenue, we granted an adjournment to obtain information from New Delhi as to whether the above circular has been withdrawn or replaced by any other circular after the decision in Dayalbhai's case. Until now, the learned counsel has not been able to state that the above circular is not in force. Our answer to the first question in each of the above r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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