J H GOTLA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) These are three references made at the instance of the Assessee by the Income Tax Appellate Tribunal, Bangalore Bench under S.66(l) of the Indian Income Tax Act, 1922, hereinafter called the Act'. They relate to the assessment years 1959-60 1960-61 and 1961-62. The question of law referred in ITRC. No.33 of 1970 is: Whether on the facts and circumstances of the case, the assessee would be entitled to carry forward and set off of the losses against the share income of the assessee's wife and minor children in respect of the assessment year 1959-60 under S.24(2) of the Income Tax Act, 1922 ?

(2.) Similar question has been referred in respect of the assessment years 1960-61 and 1961-62 in ITRC. Nos. 34/1970 and 35/1970 respectively. The assessee is an individual who was carrying on the business of manufacture and sale of groundnut oil and cake. He was also an abkari contractor. On 1-6-1957 he gifted away a part of the oil mill machinery to his wife and three minor sons and a firm was constituted by the assessee's wife and another person to the profits of which the minor sons were admitted. The mill premises as well as the remaining machinery of the assessee were leased to the said firm and the firm carried on the business of manufacture and sale of groundnut oil. The assessee also entered into agreements with the said Arm under which for certain services rendered to the firm by way of management, the assessee was entitled to get commission at the stipulated rates on the purchase and sale of oil and cake made by the firm. The Assessee himself continued to carry on the business in the purchase and sale of groundnut oil and cake on a smaller scale. He also continued his business as abkari contractor.

(3.) The assessee had incurred huge losses; in his individual business in the earlier years which were being carried forward from year to year upto the assessment year 1958-59. The loss carried forward from the assessment year 1958-59 was Rs. 7,88,734. The assessee's profits from his own business for 1959-60 was Rs. 14,324. The share income of the assessee's wife and minor children from the firm for the assessment year 1959-60 was Rs. 24,592. The said income was included in the computation of the total income of the assessee under S.16(3) of the Act for the assessment year 1959-60.The assessee claimed set off of the loss carried forward from the assessment year 1958-59 against the profits of his own business as also the share income of his wife and minor children. The Income Tax Officer rejected the claim for set off in so far as it related to the share income of his wife and minor children. Similar claims for set off were made in the assessment years 1960-61; and 1961-62 but were rejected.