SETH KANHAIYALAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Sec. 66(2) of the Indian Income-tax Act. The assessee is a joint Hindu family living in Khurja in the Bulandshahr district, whose head and representative is one Seth Kanhaiya Lal. The assessment year is 1933-34. The assessee is a partner to the extent of a one third share in the firm of Messrs. Sadhoram Tularam at Calcutta. The Income-tax Officer of Calcutta found that this firm had paid Rs. 3,33,279 to its partners and he treated this as income of the firm; that is to say, no allowance was granted in respect to this sum. According to his calculations there was a profit of Rs. 1,33,039, but against this he set off a certain sum on account of depreciation and took into account certain other matters with which we are not concerned and ultimately he worked out a net loss to the firm of Rs. 5,434. He thereafter reported to the Income-tax Officer of Meerut that the assessees one third share amounted to Rs. 50,820, which sum was arrived at in the following way.

(2.) THE assessees income from property at Khurja amounted to Rs. 360 and the Income-tax Officer added this amount to the sum of Rs. 50,820 and levied income-tax upon the assessee in the amount of Rs. 51,180. He over-ruled the assessees objection that the assessees share in the Calcutta firm amounting to Rs. 50,820 was not liable to assessment. THE assessee applied to the Assistant Commissioner of Income-tax and in his grounds of appeal he also raised a plea of jurisdiction; but the appeal was dismissed. THEreafter the assessee applied to the Income-tax Commissioner for a reference to be made to this Court under Section 66(2) of the Act. THE Income-tax Commissioner has accordingly stated a case and has referred three questions of law to this Court. It may be mentioned here that the Income-tax Officer had omitted to take into account the assessees one third share in the net loss of the Calcutta firm, i.e., in the sum of Rs. 5,434, 1/3rd of that amount being Rs. 1,811. He has now corrected the error and finds that the assessees share in the firm works out at Rs. 49,009.

(3.) THE second ground is that since the assessee was doing business at Calcutta as a partner in the firm of Sadhoram Tularam, the assessment should have been made at Calcutta and not at Khurja.