9911796707
TMI Blog1992 (7) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... e that originally a firm, Messrs. Arun Kumar Mundra and Co., had declared its status as such as it had not asked for registration. Therefore, it had been assessed as an unregistered firm. According to clause 6 of the partnership deed constituting the assessee firm, the profits of the firm were to be accumulated for a period of eight years and there was to be no distribution thereof amongst the partners. The Income-tax Officer, however, relied upon section 13 of the Partnership Act according to which there was a provision for equal sharing of profits and losses between the parties subject to any contract to the contrary. Since there was no specific agreement determining the ratio in which the profits or losses were to be shared, the Income-tax Officer assessed the firm on a total income of Rs. 20,300 and, relying upon the provisions of section 13(b) of the Partnership Act, he allocated the same in the ratio of one-third each. Being aggrieved by that order, the firm filed an appeal under section 246(c) of the Income-tax Act before the Appellate Assistant Commissioner who, vide his order dated September 5, 1979, in Appeal No. 77/(JL) of 1979-80, held that since there was a definite c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground is concerned, apparently section 247 contemplates an appeal by the partner on behalf of the firm against the order of the Income-tax Officer determining the total income or the loss of the firm or the apportionment thereof between the several partners. The representative of the Revenue, however, referred to some observations at page 300 in CIT v. S. K. Basu [1970] 76 ITR 291 (Cal), wherein, referring to the second proviso to section 30(1) of the Indian Income-tax Act, 1922, which nearly corresponds to the present section 247, the Calcutta High Court observed that it is only in the case of an assessment of registered firm that a partner would have a right of appeal and this proviso would have no application to unregistered firms. We are afraid this argument is not conclusive. The observations were made by their Lordships in a different context, inasmuch as in that case the notice of demand against the firm had been issued for the full amount on each of the ex partners and, therefore, their Lordships held that each partner had separate right of appeal and a decision in an appeal by one was not res judicata so far as the other partners were concerned. Again reference was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, any decision taken in that case cannot possibly be considered to have any bearing on the merits of this appeal. In other words, we would have to consider this appeal on its own merits. The Appellate Assistant Commissioner was, therefore, fully justified in entertaining the present appeal. Of course, we are certainly not inclined to agree with the Appellate Assistant Commissioner on the merits of his judgment that the income of the firm had lost its characteristic as the nature of income and was more in the nature of capital. The mere fact that the capital was being increased would not take the increase outside the scope of income. The increase would be merely an application of the income, since it is not the assessee's case that there were any capital gains for the firm or the partners. Therefore, prima facie, the Income-tax Officer could allocate the shares among the partners. Of course, the ratios might have to be considered by him in the light of the other detailed terms of the partnership deed and actual increases in the capital. However, unfortunately for the Department, there is no ground of appeal against the order of the Appellate Assistant Commissioner raised in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the apportionment thereof between the several partners, but he cannot agitate such matters in any appeal preferred against an order of assessment determining his own total income or loss." If both the provisions are compared and contrasted, it would appear that the right is conferred only on a partner who is individually assessable on his share in the total income of the firm. This means that, where the partners of the firm are not individually assessable on their share income from the firm, the right is not available. Partners are individually assessable on the share income from the firm only when the firm is either registered firm or an unregistered firm treated as a registered firm under section 183(b). The question, however, ensues whether the share of income of the unregistered firm included in the total income of a partner for the purposes of determining average tax rates can be equated with the partners' assess ability in respect of his share in the profits of the firm. This necessarily takes us on to section 86. If the Chapter heading is any indication, we have to say that the inclusion of the share income from the unregistered firm does not answer the description of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
