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TMI Blog1983 (12) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... r this year, the profit of the firm allocable to the assessee was Rs. 1,114. 2. In the return filed by him, he did not show this amount as taxable in his hands. On the other hand, he showed his share of profit at Rs. 900. The reasons he gave were that the income from the partnership firm is also professional income and he has the right to record that income according to the method of accounting he chooses. It was the assessee's case that as far as the income from the firm is concerned, he has chosen the cash basis. Since he has drawn only Rs. 900 from the firm, only this amount could be taxed on cash basis. The ITO, however, did not accept the assessee's contention and brought to tax Rs. 1,114. 3. The assessee appealed. The AAC, after c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961 ('the Act') do not derogate an assessee's rights in this matter. According to him, section 67 is a machinery section. It is not a charging section. Unless an income is chargeable, it cannot be brought to tax merely because there is a provision in the machinery section. He then relied on the decision of the Delhi High Court in the case of CIT v. Sohan Lal Nyyar [1974] 95 ITR 90 to show that there was nothing in section 67 to indicate that the provisions were excessive and that deductions other than those mentioned in the section could be allowed to the partners. He pointed out that the High Court has held that if a deduction is admissible in respect of a partner's share in the income of the firm under section 37 of the Act, it wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (i) the income-tax payable by the firm itself shall be determined ; and (ii) the share of each partner in the income of the firm shall be included in his total income and assessed to tax accordingly. " It will be seen from this that section 182 is a non obstante section, i.e., it overrides the provisions contained in sections 143 and 144 of the Act. It says that in the case of the assessment of a registered firm, after assessing the total income of the firm, the tax payable by the firm itself will be determined and thereafter the share of each partner in the income of the firm shall be included in his total income and assessed accordingly. There cannot be anything more categorical than the provisions of section 182(1)(ii). It catego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) is a loss, any salary, interest, commission or other remuneration paid to the partner by the firm in respect of the previous year shall be adjusted against that amount and the result shall be treated as the partner's share in the income of the firm. " On a reading of the provisions of the above sub-section, it will be seen that sub-section treats the amount allocated as the partner's share in the income of the firm. Thus, a fiction is created under this section that whatever is allocated is the income of the partner. 8. The entire case of the assessee rests on the provisions of section 145. It is no doubt true that the income of a profession has to be computed according to the method of accounting followed by the assessee. But we do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e determined only on the last day of the accounting year, any amount of drawing he might have made before that last date of the accounting year is no income at all. Indeed, such a type of maintaining of accounts is not the books of account contemplated to be maintained under section 145. 10. Shri Mathur's second line of argument is regarding those cases where the High Courts have held that an assessee-partner is entitled to certain further deductions in ascertaining the share of profit. Now, this line of authorities is easily reconciliable. The starting point in determining the income of a partner is the share allocated from the firm. From that figure, if the assessee is able to prove that he has incurred some further expenditure, he can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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