JOSHI M R Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the following question has been referred to us for our determination :

(2.) AT the relevant time, pertaining to the asst. year 1959 60, the firm, M/s Vijay Chitra Mandir, Poona, was doing film exhibition business. This firm (hereinafter referred to as Chitra Mandir) had four partners till March 11, 1958, the assessee having one fourth share. One of the partners died on March 11, 1958, and the surviving partners established a new firm in which the assessee had, one third share. For the material assessment year, one third share of profits came to Rs. 10,692. There was another firm by name Vijay Enterprises alias Hind Vijay at Poona, also doing film exhibition business. For the sake of convenience that firm is called Hind Vijay. It was running in loss and was dissolved on September 6, 1955. The assessee was a partner of Hind Vijay till its dissolution. After September 6, 1955, one of the other partners took over the business. In the immediately preceding assessment year, i.e., 1958 59, the ITO allowed against the assessee's share from Chitra Mandir, a part of the carried forward loss allocated to the assessee in Hind Vijay. For the material assessment year also, similar set off was claimed of the following amounts of unabsorbed loss of Hind Vijay :

(3.) IN a further appeal by the Revenue before the Tribunal, the Tribunal accepted the contention urged on behalf of the Revenue. According to the Tribunal, the real point arising for determination would turn on whether the assessee continued to carry on in the material years the business in which the losses were incurred in the asst. yrs. 1955 56 and 1956 57. The Tribunal held that a firm is a taxable unit under the IT Act and the question whether the two firms carry on the same business would depend on the facts of the case. The Tribunal pointed out that the two firms in which the assessee was a partner do not even have the same constitution and they were clearly different entities. They did the same type of business, but cannot be doing the same business, even though there was a common manager for both the cinemas and there was some co ordination in the arrangement for obtaining films from distributors, and also some financial transactions between them. According to the Tribunal, the business carried on by two different firms cannot be one and the same business. If the two firms were carrying on separate business, according to the Tribunal, it goes without saying that the common partners of these firms were also carrying on separate business. In other words, it held that the assessee did not carry on in the accounting year the business in which he incurred losses as a partner in the asst. yrs. 1955 56 and 1956 57.