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TMI Blog1983 (9) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-tax had rightly assumed jurisdiction under section 263 and had rightly passed the order in question ? " A few facts necessary to appreciate the point in controversy may now be stated. The assessee, an individual, was a partner in the firm of Messrs Kosangas Company in which his wife, Rukmini, was also a partner. We are concerned in this matter for assessment years 1966-67 and 1967-68. For these two years the said firm had suffered a net loss in its business. When the ITO finalised the assessment for the two years, he included in the assessee's hands, under the provisions of s. 64 of the I.T. Act, the share of loss falling to the wife which came to Rs. 28,185 for the assessment year 1966-67 and Rs. 84,406 for the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of gain to the Revenue in subsequent years. In other words, determination of excessive loss in any particular year or years could be a matter likely to cause prejudice to the Revenue, although the prejudice will occur in subsequent years. It, therefore, negatived the submission of the assessee and held that the Addl. Commissioner had exercised the jurisdiction rightly. The next point considered by the Tribunal was whether the Addl. Commissioner was correct in directing the ITO to delete the wife's (share of) losses. The Tribunal observed in its order dated 18th January, 1983, that this, was the only High Court ruling directly on the point and this ruling of the Gujarat High Court was against the assessee. The observation in the Comment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16(3) of the Indian I.T. Act, 1922, it was observed that the said provision only provided for inclusion in the total income of the individual the income of his spouse or minor child and did not create a legal fiction whereby the income of another is deemed to be the income of the individual. The Division Bench has accepted that income may in certain cases include a negative income, viz., loss but according to the Gujarat High Court that concept prevailed only in the case of computation of the actual income of the assessee and including a negative income was not Warranted, according to the Bench, so far as sub-s. (3) of s. 16 was concerned. The Bench further observed that the expression " includes " in cl. (a) of sub-s. (3) of s. 16 prima f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is discernible that the words 'income' or 'profits and gains' should be understood as including losses also, so that, in one sense, 'profits and gains' represent 'Plus income' whereas losses represent 'minus income'. In other words, loss is negative profit." Even without referring to the other authorities cited at the bar we would like to observe, with respect to the learned judges of the Gujarat High Court, that the view taken and approach discernible in Dayalbhai's case [1966] 60 ITR 551 (Guj), appears to be narrow, over-technical and, hence, incorrect. We are fortified in our reaction by subsequent decisions of the several High Courts to which we may now briefly advert. The decision of the Gujarat High Court came to be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r decision in Dr. T. P.Kapadia's case [1973] 87 ITR 511, and once again held that the loss incurred by a spouse was required to be treated as if it were a loss sustained by the assessee. The Full Bench of the Kerala High Court applied its mind to the question in CIT v. B.M. Edward, India Sea Foods [1979] 119 ITR 334 [FB]. The Kerala, High Court was considering the case of an assessee for the assessment year 1971-72, and noted that the 1944 circular of the Board of Revenue, on which reliance had been placed by the Mysore High Court in Dr. T. P. Kapadia's case [1973] 87 ITR 511, had been withdrawn on April 6, 1972, that is, after the expiry of the assessment year 1971-72. According to the Kerala High Court, the fact that the assessment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f to the Gujarat High Court was to be taken, a clearly anomalous position would arise. We may point out that in the later decisions in CIT v. Smt. Mary Ignatius [1983] 141 ITR 954, the Kerala High Court, and in CIT v. Badri Prasad Agarwal [1983] 142 ITR 353, the Madhya Pradesh High Court, have come to the identical conclusion as the Mysore High Court in Dr. T. P. Kapadia's case, [1973] 87 ITR 511 (Mys), without placing reliance on the said circular. The Madhya Pradesh High Court has specifically observed in the latter decision that the Explanation added in s. 64 must be regarded as parliamentary exposition of the meaning of the word " income " as used in the unamended section. In our opinion, even without the said Explanation 2, the correct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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