NAZARABAD PLANTATION Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) THIS revision petition arises out of the order dated February 13, 1980, made by the Commr. of Agrl. IT, under s. 35 of the Karnataka Agrl. IT Act, 1957 (called shortly "the Act").

(2.) THE assessee-firm purchased a coffee estate on October 29, 1971. In addition to the consideration paid under the sale deed, the assessee separately paid Rs. 50,000 to the vendor towards what was described as the expenditure incurred by the vendor for cultivation of the estate for the period from April 1, 1971, to August 31, 1971. For the asst. yr. 1972-73, the assessee filed an application in Form No. 7 for registration of the firm enclosing a copy of the partnership deed. That application was not signed by all the partners personally. Two of the partners, namely, Mohamed Imam Nissar and Mohamed Maqbool Hussain, did not sign, but their authorised agents have signed the application on their behalf. THE assessing officer, however, accepted the application and by an order dated October 28, 1975, granted registration to the firm under s. 29 of the Act for the year ending March 31, 1972. Before the assessing officer, the firm claimed deduction of the total expenditure of Rs. 1,65,765.61, inclusive of Rs. 50,000 said to have been paid to the previous owner of the estate. THE assessing officer allowed the claim in part, but inclusive of that Rs. 50,000 and computed the income which ultimately resulted in a loss. That loss was allocated among the nine partners in accordance with their respective shares. THE said assessment was revised by the CIT in exercise of his suo motu revisional power conferred under s. 35 of the Act primarily on two grounds:

(3.) WE do not think that we could accept this contention. It is not correct to state that only if the computation results in a demand then it would be prejudicial to the interests of the Revenue. This submission is opposed to the very concept of assessment. Assessment may result in a demand or a computation of loss. If there is a loss such as, in this case, there would be allocation of the loss among the partners in proportion to their shares and they will be entitled to claim set off against their independent income and carry forward the loss for the succeeding year up to six years as provided by s. 15 of the Act. Since the deduction of Rs. 50,000 has also entered into the computation of loss in the assessment order, that deduction itself must be considered as prejudicial to the interests of Revenue if the assessee is not entitled to such deduction. The order of the CIT, therefore, cannot be found fault with on the ground that it was not prejudicial to the interests of the Revenue.