COMMISSIONER OF INCOME TAX Vs. GANGADHAR NATHMAL

JUDGEMENT

(1.) THE assessee and one Bajranglal Kamalia carried on a grain business in partnership for a short time. THE partnership was dissolved on the 3rd August, 1955. THE profits or gains of the partnership were neither assessed under the Income-tax Act, 1922, hereinafter referred to as the Act, nor was the partnership registered under it. In the assessment year 1957-58, corresponding to the accounting period from the 24th July, 1955, to the 9th August, 1956, the assessee claimed that it had suffered a loss of Rs. 8,814 towards its share in the unregistered firm and that it should be allowed a set-off against its profits from other businesses in this year. THE Income-tax Officer did not allow the set-off, and his view was upheld in appeal by the Appellate Assistant Commissioner. One further appeal by the assessee, the Appellate tribunal felt coerced by the view taken by the Bombay High Court in Jadavji Narsidas Co. v. Commissioner of Income-tax and decided that the loss should be set off. At the instance of the Commissioner of Income-tax, this reference has been made to this court under section 66(1) of the Act for determination of the following questions of law.

(2.) PROVIDED further that where the assessee is an unregistered firm which has not been assessed under the provisions of clause (b) of sub-section (5) of section 23, any such loss shall be set off only against the income, profits and gains of the firm and not against the income, profits and gains of any of the partners of the firm; and where the assessee is a registered firm, any loss which cannot be set off against other income, profits and gains of the firm shall be apportioned between the partners of the firm and they alone shall be entitled to have the amount of the loss set off under this section.