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TMI Blog2020 (1) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... converting the same into partnership firm there is an inheritance of business and therefore, as per the provisions of the section 78(2) assessee is entitled to set-off business loss/unabsorbed depreciation of the proprietary concern against income of the successor partnership firm. Thus, we sustain the order of the CIT(A) and reject the grounds raised by the revenue. Additional ground in respect of expenses/debts which were not claimed in the return of income - HELD THAT:- On hearing both the sides and respectfully following the decision of the Hon'ble Bombay High Court in the case of the CIT v. PRUTHVI Brokers Shareholders Pvt. Ltd [ 2012 (7) TMI 158 - BOMBAY HIGH COURT ] we restore the claim of the assessee in respect of expenses/debts, to the file of the Ld. CIT(A) who shall decide on merits after providing adequate opportunity of being heard to the assessee. Disallowance @10% of loading and unloading expenses, hawali charges incurred by the assessee - As observing that cash component and element of personal use in the aforesaid expenses cannot be ruled out keeping in view the nature of business of the assessee firm that is transportation, the Ld. CIT(A) sustained the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that assessee claimed setoff of unabsorbed depreciation pertaining to A.Y. 2007-08 to A.Y. 2011-12 and the assessee was required to give justification for the same, since according to the Assessing Officer assessee has already claimed setoff of unabsorbed depreciation for the A.Y. 2012-13. In response to the query raised by the Assessing Officer the assessee vide letter dated 08.02.2016 furnished its reply stating that Late Mr. Virchand Narshi Soni expired on 08.12.2008. He was carrying on the business under the name and style of Narshi Nanshi Sons as a proprietor. Assessee submitted that after his demise his legal heirs continued the same business as a partnership firm w.e.f. 09.12.2008 under the same trade name using the same place of business, telephone lines etc. It was also submitted that business recoveries are affected in the firm s name and the subsisting transactions are cleared and the assets of the business are utilized in clearing the liabilities by the heirs in the process of carrying on the business as successors through partnership firm. Therefore, it was contended that as per the provisions of the section 78(2) of the Act the unabsorbed depreciation and bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip deed wherein they agreed to carry on the said business of speculation. In the said speculation business carried on in the name of the partnership firm, profits were earned and the assessee sought to carry forward and set off the losses incurred by the deceased in his proprietary business against the income from the speculation business of the partnership firm. The Income-tax Officer disallowed such set-off on the ground that there was no succession to the business of the deceased. The Appellate Assistant Commissioner dismissed the appeals filed by the assessee but on further appeal the Tribunal allowed the set-off. The Tribunal found that there was succession to the business of the deceased on the basis of the following circumstances (page 163) : (i) The partnership deed which was drawn up on April 22, 1964, within a month of the death of the deceased, records the fact of the parties thereto as heirs and legal representatives of the deceased, and having succeeded to and carried on the speculation business of the deceased. This claim of the assessee having carried on the speculation business even prior to the date of the partnership deed had not been disputed. Even, if the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sors. 6. Shri Shukla, learned senior counsel appearing for the Revenue, in support of the appeals, has invited our attention to the decision of this court in Saroj Aggarwal v. CIT [1985] 156 ITR 497, wherein this court has dealt with the question regarding applicability of Section 78(2) of the Act in the context of succession to the business of a deceased partner in the partnership. In that case, this court has approved the decision of the Bombay High Court in CIT v. Bai Maniben [1960] 38 ITR 80, wherein the High Court has observed that the conclusion of the Tribunal as to whether there was succession by inheritance is one of a question of fact. 7. Having regard to the finding recorded by the Tribunal after taking into consideration the facts and circumstances that the partners, as heirs, had succeeded to the business of the deceased which finding has been accepted by the High Court in the present case, we are of the opinion that in the facts of these cases no ground is made out for interference with the impugned judgment of the High Court. The appeals are, therefore, dismissed. No order as to costs. 9. The above decision squarely applies to the facts of the case Thus, respectfully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4,89,472/- and ₹.2,00,000/- respectively on account of various expenses. 17. On a perusal of the order of the assessment order, we find that the Assessing Officer for the A.Y. 2013-14 while completing the assessment made disallowance @10% of loading and unloading expenses, hawali charges incurred by the assessee observing that cash component and element of personal use in the aforesaid expenses cannot be ruled out keeping in view the nature of business of the assessee firm that is transportation, the Ld. CIT(A) sustained the disallowance to the extent of 5% of the expenses as against 10% disallowed by the Assessing Officer. Similarly, for the A.Y. 2014-15 the Ld. CIT(A) restricted the disallowance to ₹.2,00,000/- as against 10% disallowed by the Assessing Officer. Considering the submissions of both the parties and taking the totality of facts and circumstances into consideration we direct the Assessing Officer to restrict the disallowance to ₹.2,00,000/- for both the assessment years i.e. 2013-14 and 2014-15 to meet the ends of justice. 18. In the result, appeals of the revenue are dismissed and the cross objections of the assessee are partly allowed as indicate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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