PRAMOD MITTAL Vs. CIT

JUDGEMENT

(1.) This appeal by Pramod Mittal impugns order dated 15.7.2011 passed by the Income Tax Appellate Tribunal (tribunal, for short). The appeal pertains to the assessment year 2005-06. Ld. counsel for the appellant submits that the appellant-assessee, who is an individual, had taken over the running business of a partnership firm, in which he was a partner, including fixed assets, current assets and liabilities. It is submitted that the appellant in his return filed in status of an individual was entitled to set off the loss of Rs. 22,40,193/- suffered by the partnership firm. This loss should be reduced from the income earned by the appellant as an individual. The appellant relies upon Section 78(2) of the Income Tax Act, 1961 (Act, for short) and decisions of the Supreme Court in CIT v. Madhukant M. Mehta,2001 247 ITR 805 and Saroj Aggarwal v. CIT, 1985 156 ITR 497.

(2.) We have considered the contentions raised by the petitioner but do not find any merit in the same. Partnership firm is a separate and distinct unit of assessment. The petitioner and his brother constituted a partnership firm, which was dissolved w.e.f. 18.9.2004. The partnership firm will have to be assessed on the income for the period 1.4.2004 to 18.9.2004. After the dissolution of the partnership firm, it ceased to exist. The petitioner in terms of the dissolution deed became entitled to fixed assets, current assets and liabilities of the firm. The other partner was paid the current account balance and capital balance standing to his credit. After 18.9.2004, the appellant continued to carry on the business as a sole proprietor. As a sole proprietor the income earned was taxable in his hand as an individual and as a separate unit/person.

(3.) Section 78(2) of the Act reads: -