R.N. Pyne, J. - (1.)This reference, at the instance of the revenue under Section 66(1) of the Indian Income-tax Act, 1922, relates to the assessment year 1958-59, the relevant previous year for which having ended on March 31, 1958. The facts mentioned in the statement of case prepared by the Tribunal are these. The assessee is a partner in two registered firms known as Kothari and Co. and Kothari Trading Co. In making the assessment on the assessee the Income-tax Officer took the following amounts as the share income from the said firms and allocated them as follows : Name of the firm Share of business loss under section 10 Share of dividend income under section 12 JUDGEMENT_691_ITR110_1977Html1.htm
(2.)It may be noted that if the dividend was not taken separately, then the share income taken as a unit would have been a loss in each of these cases. By the share income being taken separately in respect of business loss and dividend income the assessee stood to lose because the dividend income was treated as unearned income and a higher surcharge was payable. The assessee contested the computation made by the Income-tax Officer in the appeal preferred against the order of the Income-tax Officer before the Appellate Assistant Commissioner. It was submitted that as the assessee had received income as a share of profit from the partnership concera it should be treated as his income from business. The Appellate Assistant Commissioner, however, did not accept this contention of the assessee and was of the view that the Income-tax Officer had correctly treated the income as from other sources under the head " Dividend ". The Appellate Assistant Commissioner, therefore, dismissed the assessee's appeal.
(3.)Against the order of the Appellate Assistant Commissioner the assessee preferred a second appeal to the Tribunal. It was contended on behalf of the assessee that the Income-tax Officer should not have treated the sum of Rs. 61,150 and Rs. 31,971 as income from other sources and that the share income was a unit by itself coming under Section 10 and that disintegration was unwarranted. On behalf of the department it was urged that the share income was not a single unit, that the computation made in the hands of the firm in the assessment was transposed in the hands of the partner under respective heads, that the several heads did not lose their identity in the process of transposition and that the action of the Income-tax Officer was proper. On behalf of the department reference was also made to Section 67(2) of the 1961 Act as clarifying what was previously done in the assessment of the partners prior to the 1961 Act.