KESHRICHAND BHANABHAI Vs. COMMR OF I T

JUDGEMENT

(1.) THE question that arises on this reference is whether the assessee is entitled to set off a certain loss against the profits made by it in the year 1942-43 under Section 24 (2) of the Indian In some-tax Act.

(2.) THE assessee is a firm and it consists of four partners, and it appears that these four partners constituted an undivided Hindu family. In the assessment year 1941-42 a decision was given by the Income tax Officer under Section 25a that this Hindu undivided family was disrupted on the first day of Kartik Sudi of Samvat year 1997, which corresponds to November 22, 1940. This decision was based upon a partition deed which was executed on that date. The contention of these four coparceners was that the disruption took place really on November 11, 1939, and not on November 22, 1940. That contention was rejected and, as I said before, the Income-tax Officer came to the conclusion that the disruption took place on the first day of Kartik Sudi Samvat year 1997. Now in the assessment for the year 1941-42 of this Hindu undivided family there was found a loss of Rs. 40,162 and therefore the family had not to pay any tax in the year 1941-42. Mr. Kolah says that the decision of the Income-tax Officer as to the disruption of the family was not challenged by him because he had no tax to pay and therefore any appeal from that decision would have been academic. But whether the appeal would have been academic or not, the Income-tax officer gave a decision as to the status of the Hindu undivided family under Section 25a, and if that decision was not challenged in appeal, that decision stands and must be treated to be binding upon the parties.

(3.) NOW, in the year in question, viz. 1942-43, a profit has been made by the assessee firm which consists of the same coparceners as constituted the Hindu undivided family and which coparceners carried on a business as a firm. This firm has been registered by the Income-tax Authorities. This firm has made a profit for the year 1942-43 and its contention is that it is entitled to set off the loss of Rs. 40,162 incurred by the Hindu undivided family in the assessment year 1941-42. Mr. Kolah's submission is that the assessee which sustained the loss in 1941-42 is the same assessee that made the profit in 1942-43 and, therefore, Section 24 (2) is applicable. When we turn to Section 24 (2) it provides that where any assessee sustains a loss of profits or gains in any year and the loss can-not be wholly set off, the portion not so set off shall be carried forward to the following year and set off against the profits and gains of the assessee from the same business, profession or vocation for that year. Therefore, it is clear on a plain reading of this sub-section that the assessee who sustains a loss and the assessee to whom the set off is allowed must be the same, and the narrow question for our consideration is whether in this case it can be said that the registered firm which claims the set off and the Hindu undivided family that sustained the loss are the same assessees.