COMMISSIONER OF INCOME TAX Vs. BAI MANIBEN

JUDGEMENT

(1.) A business in cloth was conducted in the name of Hiralal Mathuradas in partnership at Mulji Jetha Market, Bombay. Of that partnership Hiralal and his nephew Jayantilal were partners with equal shares in profits and loss. Hiralal died on 14th Aug., 1953, intestate and leaving him surviving his widow Bai Mani, but no children. On the 15th of Aug., 1953, a partnership deed was executed under which certain terms of partnership between Jayantilal and Bai Maniben, widow of Hiralal, were recorded and under which the business conducted in the name of Hiralal Mathuradas was to be continued, and under that agreement of partnership the business was conducted. In the asst. yr. 1953 -54, when Hiralal was alive, in conducting the business a loss of Rs. 1,07,420 odd was incurred. In the year 1954 -55 also in conducting the business loss was incurred. For the first time, assessment was made on the widow Bai Mani in the asst. year 1954 -55. As the partnership had suffered a loss in that year, no tax was assessed as payable by her. In the asst. year 1955 -56, the partnership earned some profit and her share of the loss of the year 1954 -55 and also a half share of the loss which was suffered prior to the 14th of Aug., 1953, was sought to be set off by the assessee, Bai Mani, under S. 24(2) of the IT Act. In respect of the share of loss suffered during the lifetime of Hiralal, Bai Mani claimed in the assessment proceedings that she had by inheritance succeeded him in the constitution of the firm and, therefore, his share in the loss was liable to be set off against the income, profits or gains of the business for the asst. year 1955 -56. The ITO negatived that contention and the AAC confirmed that order. The Tribunal, however, held that the share of Hiralal was given to Bai Mani and that it had devolved on her as she was the legal heir of Hiralal and that she had succeeded by inheritance to his share of the partnership. On that view they gave the benefit to the assessee of the provisions of S. 24(2). At the instance of the Commissioner, the Tribunal has now referred the following question :

(2.) SEC . 24(2) provides :

(3.) ON the view taken by us, the answer to the question submitted to us will be in the affirmative. Commissioner to pay the costs of the assessee.