SETH JAMNADAS DAGA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The three appellants appeal against the judgment and order of the High Court of Bombay answering in the affirmative, the following question :

(2.) The appeal to the Appellate Assistant Commissioner was unsuccessful, and six appeals were taken to the Tribunal by the three appellants three for each assessment year. These appeal were disposed of by a common order. The Tribunal held, relying upon the second proviso to S. 24(1), that just as loss in an unregistered firm could not be set off against profits from a registered firm under that proviso, the profits in an unregistered firm could not be set off against the loss from a registered firm. It relied upon a decision of the Madras High Court in Commissioner of Income-tax v. Ratanshi Bhavanji, 1952-22 ITR 82 : (AIR 1953 Mad 358), which it purported to follow in preference to a decision of the Punjab High Court in Banka Mal Niranjandas v. Commissioner of Income-tax, 1951-20 ITR 536. The same reasoning was applied to the assessment year 1949-50, and in the result, all the six appeals we allowed.

(3.) The order of the Tribunal involved, in addition to the point set out above, certain other questions, which were asked by the assesses to be referred to the High Court for decision under S. 66(1). The Commissioner also asked for a reference in respect of the decision, substance whereof has been set out above. The Tribunal referred two questions at the instance of the assessee and one question, which we have already quoted, at the instance of the Commissioner. In the High Court, the assessees abandoned the two questions, and the High Court accordingly expressed its opinion in the judgment and order under appeal, on the remaining question. The High Court differed from the decision of the Tribunal, and held that the profit from the unregistered firm could be set off against the losses from the registered firms to find out the rate applicable to Rs. 262/-, which was other income of the assessees. The High Court also held that the assessees could not carry forward the loss of the registered firms to the following year, because such loss must be deemed to have been absorbed in the profits of the unregistered firm. It, however, certified the case as fit for appeal to this Court, and the present appeal has been filed.