COMMISSIONER OF INCOME TAX Vs. KAILASHPAT JUTHA LAL

JUDGEMENT

(1.) In compliance with the direction issued by this court in its order dated November 28, 1977, the Income-tax Appellate Tribunal, Allahabad Bench, has referred the following question of law for the opinion of this court:

(2.) The facts giving rise to this question briefly stated are that the assessee, an individual, enjoyed income from salary, dividend, interest, besides share income from a partnership firm, M/s. Juthalal Mahavir Prasad (hereinafter referred to as "the firm"). The firm, inter alia, carried on speculation business also and in the previous year relevant to the assessment year 1964-65, it suffered a loss in that business. In that year the assessment of the assessee was completed on August 19, 1968, taking his share of speculation loss from the firm at "nil" subject to rectification. The assessment of the firm was completed on March 24, 1969, and the total loss was determined at Rs. 2,39,406 which comprised of loss in ready business at Rs. 23,614 and loss in speculation business at Rs. 2,15,792. The loss in ready business was apportioned amongst the three partners of the firm according to their profit-sharing ratio. As for the loss in speculation business it was not so apportioned and a note was made to the following effect by the ITO: "The above loss will be set off against future speculation losses, if any."

(3.) It shall not be out of place to mention at this very stage that the apportionment of the loss in speculation business was made by the ITO under Section 158 of the I.T. Act (hereafter "the Act") on 31st August, 1974, and the amount which fell to the assessee's share was Rs. 71,931. In the meantime in the previous year relevant to the assessment year 1972-73 the firm earned profit in speculation business and that profit came to Rs. 22,274 in the assessee's share. In his assessment for this year the assessee claimed a set-off of that profit against the speculation loss of the assessment year 1964-65. The claim was repelled . by the ITO on the view that the assessee's assessment for the year concerned, that is, 1964-65, could be revised under Section 155 of the Act within four years of the final assessment made in the case of the firm, that is, by March 23, 1973, and since that section had become barred by time, the assessee's share of speculation loss remained at "nil" as determined in his assessment for that year and the question of allowing set-off of the same against the speculation profit of the year under consideration did not arise and hence could not be allowed.