COMMISSIONER OF INCOME TAX Vs. NATARAJAN S

JUDGEMENT

(1.) AT the instance of the Revenue, the following question of law has been referred under the Income-tax Act, 1961 :

(2.) THE assessee is an individual. He sold his proprietorship business styled as V.R. Sambasiva Aiyar and Company as a going concern to one Shri Mir Mohammed Ali for a consideration of Rs. 36,000. THE Tribunal referred to the retirement of the assessee from the two partnerships viz., Kamakshi Industries and Southern Engineering Company, due to dispute which arose among the partners. THE assessee had received a sum of Rs. 10,000 for taking over his share in Shree Kamakshi Industries and Rs. 8,000 for taking over 5 per cent. of the share which the assessee held in the firm of Southern Engineering Company when both the firms were reconstituted on January 1, 1973. THE assessee filed a return of income for the assessment year 1974-75 claiming a loss of Rs. 47,267. THE assessee claimed that he was entitled to carry forward certain business losses. THE Income-tax Officer, inter alia, determined the business income as against the loss returned at Rs. 1,43,219 by adjusting the loss claimed against a deemed profit under Section 41(2) of Rs. 2,08,595 on the ground that it had arisen by reason of sale of the business of V.R. Sambasiva Aiyar and Co., as a going concern. We are not concerned with the other items found in the order of assessment. THE Income-tax Officer also declined to carry forward the depreciation business loss as the business was relinquished in the year of accounting. On appeal, the Appellate Assistant Commissioner confirmed the assessment. THE assessee carried the matter in appeal to the Appellate Tribunal and raised several contentions regarding the assessment of profit under Section 41(2) of the Act. THE Tribunal raised the following points for consideration :

(3.) ACCORDINGLY, we answer the question of law referred to us in the affirmative, in favour of the Department and against the assessee, subject to the direction that the Tribunal should go into the question once again and determine the liability to tax. As there was no representation on behalf of the assessee, there will be no order as to costs.