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TMI Blog1956 (10) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee it claimed that it had incurred a loss of ₹ 23,672 in the three foreign businesses in which the assessee was a partner and claimed a set-off of this sum against its income from its money-lending business in British India. The Income-tax Officer negatived the claim to the set-off, and this order was confirmed by the Appellate Assistant Commissioner and by the Tribunal on appeals by the assessee. The reasoning on which this claim was disallowed by the Tribunal was, that though, when an assessee carries on more businesses than one and sustains loss in one of them, the same could be set off against the income from other businesses under section 10, that principle was inapplicable where the business carried on by the assessee was one in partnership with others. To such a case the Tribunal held that section 10 would not apply, and the right to set-off could arise only under section 24, and that as none of the sub-sections was attracted to the present case, the assessee was not entitled to the relief claimed. The question for our consideration is whether this view is correct. We have had occasion to consider in Parasram Jethanand v. Commissioner of Income-tax [1956] 29 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-off of loss incurred under one head mentioned in section 6 against the income or profits from other heads in the same year, does not apply to the case of such an assessee. So far there is no dispute. The point however that was urged by learned counsel for the Department was, that in the present case there was no identity between the unit which derived the income and the units which sustained the loss, and therefore there was no possibility of set-off under section 10 which permits the loss incurred by the same unit being set off against the profit derived by it, as was done in Parasram's case (supra) . In support of this position, Mr. Rama Rao Sahib referred us to the terms of section 3, which specified the units which were the subject of assessment as individual, Hindu undivided family, company and local authority and of every firm and other association of persons or the partners of the firm or the members of the association individually. From this he drew the inference, that a firm as a unit of assessment was entirely distinct from the partners composing it who might themselves be units of assessment in their individual capacity. Based on this he urged that, when an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge under the provisions of the Income-tax Act. Learned counsel for the Commissioner urged that it did and referred us to certain provisions of the Income-tax Act to which we shall immediately advert. Under section 14(2) the tax shall not be payable by an assessee-(a) if a partner of an unregistered firm in respect of any portion of his share in the profits and gains of the firm computed in the manner laid down in clause (b) of sub-section (1) of section 16 on which the tax has already been paid by the firm .. Section 16 (1) (b) runs thus : 16(1). In computing the total income of an assessee- (b) when the assessee is a partner of a firm, then, whether the firm has made a profit or a loss, his share (whether a net profit or a net loss) shall be taken to be any salary, interest, commission or other remuneration payable to him by the firm in respect of the previous year increased or decreased respectively by his share in the balance of the profit or loss of the firm after the deduction of any interest, salary, commission or other remuneration payable to any partner in respect of the previous year : Provided that if his share so computed is a loss, such los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also against a partner of a firm in regard to his share-income does not throw any light on the character of the income derived by the assessee as a partner in a firm. No doubt when there has been an assessment of a firm and tax has been collected from that entity in the case of unregistered firms, the individual partner who is in receipt of that income is not again made to pay tax on his share of the profits [section I4(2)(a)]. Section 16(1)( c) does not militate against the construction which learned counsel for the assessee invites us to adopt. Mr. Rama Rao Sahib further urged that the Department had an option to assess either the firm or the individual and that if could not be compelled to assess the individual, and that unless the individual was assessed, his share of the loss could not be determined. In the present case, the firms themselves being non-residents and not being in receipt of taxable income have not been assessed under the Indian Income-tax Act; there was no question of assessing the firms. It was further suggested that the Departmental Authorities were not desirous of assessing the individual either in regard to his share from these firms, with the resultant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst question that we have to consider is whether section 10 has any application to the case of an assessee who is a partner of a registered firm. Mr. Joshi's contention is that section 10 has no application at all because section 10 deals with the profits of a business carried on by the assessee and according to Mr. Joshi the business in this case is not carried on by the assessee but is carried on by the assessee along with a partner or partners. Mr. Joshi says that a firm under the Indian Income-tax Act is an assessable entity and therefore a distinction must be made between a business carried on by a firm and a business carried on by an individual. Although a firm is an assessable entity under the Indian Income-tax Act a firm is not a legal entity. In the eye of the law a firm is a compendious expression used to indicate that several persons constituting that firm are carrying on a business. But that compendious expression cannot give to the firm a legal entity or a legal existence. In law it is only the partners who exist and who carry on the business ..Therefore the contention that section 10(1) cannot apply to a partner in a registered firm is untenable because he does ..... X X X X Extracts X X X X X X X X Extracts X X X X
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