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TMI Blog1954 (9) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the relevant period was a partner of firm Dhanpat Mal Jawala Das, with its principal place of business at Amritsar having a thirteen-anna share and Bodh Raj, the other partner, had a three-anna share. The firm Dhanpat Mal Jawala Dass, before the partition of the country, carried on business both in India as well as in what is now Pakistan and was a registered firm. For the assessment year 1946-47 the assessment of this firm was completed on the 28th of August, 1948. The total income of the firm was computed- at ₹ 92,984 and to this had to be added excess profits tax refund of ₹ 4,261. This firm incurred a loss of ₹ 27,109 in respect of the business carried on at Vihari (now in Pakistan). Thus their net income for the purposes of assessment comes to ₹ 70,136. Acting under section 23(5)(a) of the Income-tax Act the Income-tax Officer apportioned this income as follows:- Name of partner Profit Seth Satya Pal 0-13-0 ₹ 56,985 L. Bodh Raj 0-3-0 ₹ 13,151 ₹ 70,136 What the Income-tax Officer did after this was to split up the loss incurred in Pakistan and holding that the share of the loss of the assessee was ₹ 18,564, he comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tner of a registered firm are to be ascertained that can only be done in the manner provided in this section and the liability to pay tax by the partner also can only be determined in accordance with the provisions of this section. It was further submitted that the total income of firm Dhanpat Mal Jawala Dass was ascertained, the shares of the partners determined and the liability of each of the partners to pay the tax on their respective shares was also fixed by the Income-tax authorities acting under section 23(5)(a) of the Income-tax Act. Once that was done, it was not allowable under the section to the Income-tax Officer to add to the income of the assessee any amount which the Department thinks was earned by the registered firm. Therefore the contention comes to this that what the Income-tax Officer has done is that by adding ₹ 18,564 to the income of the assessee he has in effect increased the total income of the registered partnership which is not allowed by the law. A similar matter came for determination before a Division Bench of the Bombay High Court in Commissioner of Income-tax v. Dwarkadas Vassanji [1953] 23 ITR 109. It was held that as the registered firm had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim any exemption under section 4 on the ground that they were "not ordinarily resident or not resident" and that the provisions in section 4 limiting the liability of persons not resident or not ordinarily resident in British India could not be applied so as to qualify or even override any subsequent provision in the Act. At page 212 Lord Reid observed:- " In their Lordships' view the question in this case is whether the provisions of the Act which deal with partnership income can be reconciled with an intention to exclude from the total income of partners not resident or not ordinarily resident in British India a part of their share of the firm's income in respect of income accruing to the firm from outside British India." Their Lordships thus in effect held that under section 23(5) partnership income and the liability to pay tax on that income could not be limited by section 4. In that case the assessee was claiming exemption and the Privy Council held against it on the ground that the liability to pay tax arises under section 23(5)(a) and any exemption which is given by section 4 does not become applicable. On the authority of these cases I am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be allowed where income arising without the territories of the Dominions is chargeable in both the Dominions. Other articles are not necessary for the purposes of this case excepting article VII which also may be quoted in full: - "Article VII.-(a) Nothing in this agreement shall be construed as modifying or interpreting in any manner the provisions of relevant taxation laws in force in either Dominion. (b) If any question arises as to whether any income falls within any one of the items specified in the schedule and if so under which item the question shall be decided without any reference to the treatment of such income in the assessment made by the other Dominion." To this agreement is attached the Schedule referred to in article IV. The first column of this Schedule gives the source of income. Columns 2 and 3 give the percentage of income which each Dominion is entitled to charge under the agreement. The fifth item in this Schedule deals with income from business or other sources and the ninth item is as follows :- 1 2 3 9. Any income derived from a source or category of transactions not mentioned in any of the foregoing 100% by the Dominion in which th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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