9911796707
TMI Blog1983 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... e head "Business" assessable in respect of his share of the auditing firm's professional earnings. The one-half portion of the assessee's house under the firm's occupation, however, raised two problems in the assessment. One was whether the assessee was entitled to exclude from assessment one-half of the annual value of his house property which appertains to the portion in the firm's occupation. This involved the application of the saving provision in section 22 of the Income-tax Act. The Tribunal, when the matter came before them in appeal, took the view that one-half of the annual value must be excluded in reckoning the assessee's income under the head "Property". The Tribunal differed from the Assessing Officer's determination in this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, a firm is dealt with under the income-tax law as a separate fiscal entity different from its partners. He accordingly urges that whatever is done by a firm is done by it for its own purposes and cannot be regarded, ipso jure, as done by the individual partners. The issue for decision, as we earlier mentioned, is not whether a partnership firm is or is not a legal person, but whether a partner can be said to carry on his profession or business, when it is his partnership firm which carries it on ? The answer is to be found in the basic idea behind section 5 of the Indian Partnership Act, 1932, and section 67(2) of the Income-tax Act. Section 4 of the Partnership Act defines a partnership as the relation between persons who have agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recognises the basic principle of partnership law, according to which partnership business is nothing but the business carried on by every partner acting for all the partners. It seems to us, therefore, that both in legal theory and in fiscal theory, a partner may be truly regarded as carrying on business, even if he is a "sleeping partner" and the other partners look after the business of the firm. We, therefore, agree with the conclusion of the Tribunal in the present case that the portion of the assessee's house occupied by the assessee's auditing firm for its Office must be held to be used for the purposes of the business carried on by the assessee. It is a minor question whether the office portion of the house can be regarded as bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achinery. There was no dispute about the fact that the machinery was used for the firm's business. The only snag was that the firm did not own the machinery as one of its assets. The ownership of the machinery was retained with one partner to the exclusion of the other partners. This divergence between ownership and user raised a piquant situation; the firm could not get the depreciation allowance, because the firm did not own the machinery ; the partner owned the machinery, but could not claim depreciation, because it was not used in his business. This court, in both the cases, came to the conclusion that the firm was entitled to depreciation. We must, with respect, isolate these two decisions as largely turning on their facts, or rather, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee himself, we must hold that the assessee is entitled to depreciation allowance for the user of the half portion of the house on its written down value. Having discussed the points arising in this reference, it only remains for us to reproduce the questions of law propounded by the Tribunal in this case, and render our formal answers thereto. The questions of law are as follows: "(1) Whether, on the facts and in the circumstances of the case, the Appellate, Tribunal was right in holding that no notional income in respect of the portion of property occupied by the firm should be assessed in the hands of the assessee ? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
