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TMI Blog1995 (9) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... on in Tax Cases Nos. 408 and 409 of 1982 is as follows : " Whether, on the facts and in the circumstances of the case, and having regard to the provisions of rules 5 and 7 in Part IV of the First Schedule to the Finance Act, 1975, the Appellate Tribunal was right in holding that the assessee's share of loss from a firm, known as Shakthi Estates, should be taken into account and given set-off while computing the net agricultural income of the assessee for the assessment year 1975-76 ? " The sole question in Tax Cases No. 978 of 1986 runs as follows : " Whether, on the facts and in the circumstances of the case and having regard to rules 5 and 7 in Part IV of the First Schedule to the Finance Act, 1980, the assessee's share of loss from a firm should be taken into account and given set off while computing the net agricultural income of the assessee ? " (Though in the abovesaid question the term "Finance Act, 1980" is referred to, to be precise it must be "Finance (No. 2) Act, 1980"). Thus, of these two almost identical questions, the first refers to the relevant provisions in the Finance Act, 1975, and the second refers to the Finance (No. 2) Act, 1980. Since the relevant pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,23,528 against his own individual agricultural income of Rs. 23,060. This set off claimed has also been allowed likewise by the Tribunal in the other order of the Tribunal in relation to Tax Case No. 978 of 1986. Here also, the same interpretation of the abovesaid proviso to rule 7 has been adopted. So, the question to be decided by this court is, whether the abovesaid interpretation adopted by the Tribunal in the abovesaid two orders is correct. In this connection, we may first set out the abovesaid rule 7 and rule 5, which are as follows : " Rule 5.--Where the assessee is a partner of a registered firm or an unregistered firm assessed as a registered firm under clause (b) of section 183 of the Income-tax Act, which in the previous year has any agricultural income, or is a partner of an unregistered firm which has not been assessed as a registered firm under clause (b) of the said section 183 and which in the previous year has either no income chargeable to tax under the Income-tax Act or has total income not exceeding the maximum amount not chargeable to tax in the case of an unregistered firm but has any agricultural income, then, the agricultural income or loss of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. But, we are unable to accept the contention of learned counsel for the assessee and the reasoning and conclusion reached by the Tribunal. The term "registered firm" is defined under section 2(39) of the Act, as follows : " ' registered firm ' means a firm registered under the provisions of clause (a) of sub-section (1) of section 185 or under that provision read with sub-section (7) of section 184. " In other words, if a firm under the Partnership Act gets registered under section 185(1)(a) or under the said provision read with section 184(7), then only, it is a "registered firm". But, if it is not so registered, it is only an unregistered firm as defined under section 2(48) since the latter provision says "unregistered firm, means a firm which is not a registered firm." Simply because such an unregistered firm, in relation to a particular assessment year, is not having any income at all chargeable to tax under the Act, it would not cease to be an unregistered firm as per section 2(48). There is no warrant for such an interpretation of section 2(48). In the present case, the above said firm "Shakthi Estates" may have only agricultural income in the relevant assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a firm cannot at all be made under section 184, if the firm has only agricultural income during the previous year in question. In fact, in an application for such registration, all that is to be decided is, whether there is or there was during the previous year in existence a genuine firm with the constitution as specified in the instrument of partnership (vide section 185). Further, if the interpretation sought to be made by learned counsel for the assessee on the abovesaid expression used in the ab ovesaid proviso, is to be adopted, then, in that case, rule 5 itself will become inapplicable to the assessee since in rule 5 also, the same expression "an unregistered firm, which has not been assessed as a registered firm under clause (b) of section 183 of the Income-tax Act" is used (no doubt, with a rider "and which . . . agricultural income") and the whole scheme of the relevant Finance Act in this regard may become unworkable. Therefore, such an interpretation cannot be the correct interpretation. Further, while rule 5 says about what constitutes the relevant share of agricultural income or loss of the assessee from the firm in question, rule 7 in the main part says that in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income, viz., partnership in the above referred to firm alone could not be set off against the income of the assessee from another source of agricultural income. To this, learned counsel for the Revenue answers by saying that such a loss could be carried forward by the said firm itself and set off against succeeding years' income. Whatever it is, when a Legislature has chosen to, enact the abovesaid proviso, prohibiting one kind of set off, we cannot go behind it and say that the Legislature should not have done it or that it should be interpreted in the way in which the assessee wants it to be interpreted. Then, coming to the above referred to second question referred to us in Tax Cases Nos. 408 and 409 of 1982, which has been extracted in paragraph 3 (page 135) above, the contention of learned counsel for the Revenue is that against the levy of interest alone, by the assessing authority, under sections 139(8) and 215 of the Act, a first appeal by the assessee to the Appellate Assistant Commissioner would not lie at all. No doubt, in this regard, he referred to section 246 and relies on Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961 (SC). On the other hand, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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