(1.) THESE two referred cases raise a common question of law and have been consequently heard together at the request of the learned advocates for the parties. Both these cases have been referred under S. 66(1) of the Indian IT Act. In Case No. 7 of 1960 the question referred is whether the assessee's share of loss of Rs. 17,853 relating to the joint venture business in Sailu branch was rightly allowed, though it related to an unregistered partnership. In Case No. 1 of 1960, the question is whether the assessee's share of loss in the firm of M/s Vivekananda Textiles, which firm was not assessed to tax and which was also not registered for the asst. year 1951 -52, can be taken into consideration for the purpose of determining the assessee's net income from several sources falling under the head "Profits and gains of business, profession or vocation" (i.e., S. 10 of the Act) and also, if necessary, for the purpose of set off permissible under S. 24(1) of the Act against his income falling under other heads.
(2.) THE facts in the first case (viz., No. 7 of 1960) are : The assessee is an HUF and for the asst. yr. 1357 F. it claimed a set -off Rs. 17,853 on account of loss in a joint venture at Sailu where it derives income from business in groundnut oil and also in speculation. The ITO held that the loss in the joint venture at Sailu was not proved and hence disallowed the same. On appeal, the AAC observed that the joint venture was an unregistered partnership and hence the share of loss from that business could not be allowed in the assessment of the partner. Against this order the assessee appealed to the Tribunal which allowed the claim of the assessee, holding that the books of account disclosed the loss and that in income -tax cases joint ventures need not be taken to be the business of a different firm. They, therefore, allowed the loss of Rs. 17,853.
(3.) IN the second case (No. 1 of 1960), the assessee derived income from several sources, such as personal business in mica, business carried on in several partnerships wherein he is a partner and from shares in companies. For the asst. year 1951 -52, the previous year for which ended on 31st March, 1951, the assessee was also a partner in a firm known as the Vivekananda Textiles, Nellore, which firm was not borne on the list of the ITO. The firm also did not make a voluntary return as required under S. 22(1) nor any notice under S. 22(2) was served upon it. As a consequence the results of its business assessable for the year 1951 -52 remained unascertainable and undetermined. The firm was also not assessed for the said assessment year. The assessee however, claimed that the said firm sustained loss and his share of loss therein alleged to be Rs. 21,005 should be taken into consideration in determining the net income and also that it should be set off against his income from other sources in accordance with the provisions of S. 24(1). The ITO did not take this loss into account and on appeal the AAC also rejected the assessee's contention; but the Tribunal allowed it.