COMMISSIONER OF INCOME TAX Vs. INDO MARINE AGENCIES

JUDGEMENT

(1.) This is a reference under S.256(1) of the Income Tax Act, 1961 at the instance of the department. The question referred is in these terms:--

(2.) The year of assessment is 1963-64 and the accounting period is that which ended on 31-3-1963. The export profit rebate is allowable under clause (i) of sub-s.(5) of S.2 of the Finance Act, 1963. That clause runs as follows:

(3.) It is not disputed that the income of the assessee, a registered firm, included profits and gains derived from the export of goods out of India. The Income tax Appellate Tribunal allowed the deductions under the above section. One would have expected that there could be no controversy on such deduction being allowed. But apparently complications have arisen because of the fact that the partners when they were assessed were also given the benefit of the section by giving them the deductions that could be allowed in relation to their share income which apparently included profits and gains from export of goods. Further complications arose because of the stand taken by the assessee before the Income tax Officer that if the deductions under the section are permissible only once, the deductions may be allowed from the tax payable by the partners on their assessments. So the arguments before the Tribunal turned on the question whether both the partners as well as the firm were entitled to the deductions under the section. The Tribunal took the view that the registered firm, the assessee, as well as the partners of the firm were entitled to the benefit of S.2(5)(i) of the Finance Act, 1963. They relied on the view expressed by the Gujarat High Court in the decision in Commissioner of Income tax, Gujarat v. Arun Industries reported in 1966 (61) ITR 241 . The question that arose for decision therein was whether the registered firm was entitled to the benefit of S.150 of the Indian Income tax Act, 1922 when the partners had already been given the benefit of that section in their assessments. The Court came to the conclusion that both the firm and the partners were entitled to the benefit of S.15C in their respective assessments. It seems to have been assumed in that case that the share income of the partners determined under S.23(5)(a)(1) of the Indian Income tax Act, 1922 also included the profits or gains derived from a new industrial undertaking relating to which S.15C of that Act applied. It is doubtful whether this assumption is correct for, once the deduction from the total income of the firm of the profits and gains from the new undertaking had been made as required by S.15C and thereafter the net income of the firm is divided among the partners, the share of the income of any partner may not include the profits and gains of the new undertaking which has to be deducted. If this is so, the partners may not be entitled again to claim deduction under S.15C in their assessments. This question, however, does not arise before us and we therefore express no opinion on it.