COMMISSIONER OF INCOME TAX Vs. PRABHUDAS AND CO

JUDGEMENT

(1.) The question which has been referred to this Court u/s 256(1) of the IT Act, 1961 at the instance of the Revenue is as follows :

(2.) Since on hearing the Counsel we are satisfied that the controversy raised in the question is concluded by the decision of the Supreme Court, we do not think it necessary to set out the facts of this case in detail. The relevant facts may, however, be briefly set out. The assessee firm incurred losses in speculation business amounting to Rs. 2,72,992/-, 3,74,510/- and Rs. 24,282/- in the asst. yrs. 1963-64, 1964-64 and 1965-66 respectively and undisputedly the loss arose in speculation business in shares. This loss was apportioned between the three partners of the firm and the losses so apportioned were carried forward in the individual assessment of the respective partners for the respective years. The assessee firm, however, earned a profit of Rs. 2,17,329/- from speculation business in shares in the asst. yr. 1966-67. Before the ITO the assessee had contended that the total losses incurred by the assessee firm amounting to Rs. 6,71,784/- in the immediately three preceding years was liable to be carried forward and set oft against speculation profit in the asst. yr. in question, i.e. 1966-67.

(3.) The ITO held that as the speculation losses have not been allocated amongst the partners and have been carried forward in the individual assessment of the partners, the same could not again be set off against the speculation profit of the firm. The Order of the ITO was upheld by the AAC. The Tribunal, however, took a contrary view and directed the ITO to carry forward the losses from speculation business incurred in the asst. yrs. 1963-64 to 1965-66 to the year under appeal and to set off the profit of Rs. 2,17,329/- from speculation business of the year under appeal against the same. That is how the question reproduced above has been referred at the instance of the Revenue.