SHIVA PRASAD GUPTA Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) This is a reference by the Commissioner of Income-tax, United Provinces under Section 66, Income-tax Act of 1922.

(2.) The facts as they appear from the statement of the case made by the learned Commissioner and from the several appendices attached to the statement appear to be as follows: There was a joint family business owned by several members of the family, the head office of which was in Calcutta. The income-tax for the entire business was paid at Calcutta by the head office firm carrying on business under the name and style of Sital Prasad Kharag Prasad. The members of the family decided to separate, as and from the date 9 October 1921. The date of separation having been fixed by mutual agreement, the actual partition of the effects of the family was made over to two gentlemen, Pandit Madan Mohan Malaviya and Babu Baldeo Ram Dave. These gentleman made an award on 30th November 1925. The said award made a rule of the Court on 26 February 1926. It was therefore on 26 February 1926, that the assessee, B. Shiva Prasad Gupta, at whose instance this reference has been made, became the owner of the lot given him as the result of the partition. 26 February 1926 was almost at the close of the Samvat year 1982. The Samvat year 1983 began on 15 March 1926. For the Samvat 1983 B. Shiva Prasad Gupta had a statement of his financial position drawn up in the shape of a profit and loss account. I have already mentioned that the family became separate with effect from 9 October 1921 which would correspond to sometime about Katik 1978 Samvat. In preparing the profit and loss account on the credit or income side was shown the interest which accrued to B. Shiva Prasad during the years 1978 to 1983 Samvat, each year being shown separately. On the debit or loss side was shown for different years, such amounts as represented either a loss in business or unrealizable debts.

(3.) B. Shiva Prasad Gupta was to be assessed for his income of the years 1927- 1928. The amount of his probable income for the purpose of assessment was to be taken to have been the same as was his actual income in the previous year," namely 1926-1927 which would approximately correspond to the Samvat year 1983. Having the profit and loss account prepared as aforesaid before him, the income-tax officer took all the accumulated interest of the several years as B. Shiva Prasad's income from the year 1926-1927. B. Shiva Prasad's contention was that, if on the income side the interest that accumulated from time to time was to be shown as the income of the particular year 1926-1927 (Samvat 1983), he was entitled to set off, as against that income the losses suffered by him in business (the main business being a printing press) and on account of irrecoverable debts.