J K HOSIERY FACTORY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a consolidated reference for four assessment years 1948-49 to 1951-52. The Tribunal has submitted this statement of the case to this court for its opinion on the following questions of law :

(2.) MESSRS. J. K. Hosiery Factory, Kanpur, the assessee, originally consisted of Sir Padampat Singhania, L. Lakshmipat Singhania, L. Kailashpat Singhania and one J. P. Agarwal as partners. In January, 1946, the three Singhania brothers appear to have retired from this firm and in their place the Kamla Town Trust is alleged to have become a partner. The department challenged this alleged reconstitution of the firm. According to it the Singhania brothers never retired and the trust never became a partner. This question, which is covered by question No. 1 referred to us, also arose for the assessment of J. K. Hosiery Factory for the assessment year 1947-48. In that case the Tribunal upheld the department's plea. This court confirmed that finding. It was held that no genuine partnership came into existence by which the Kamla Town Trust became a partner. This court observed J.K. Hosiery Factory v. Commissioner of Income-tax, 1971 81 ITR 557 :

(3.) QUESTION No. 4 is relevant only for the assessment year 1950-51. For the previous assessment year 1949-50, the firm had been allowed an unabsorbed depreciation loss of Rs. 43,963. The assessee-firm claimed a set-off thereof in the assessment year 1950-51. The Tribunal refused to grant this set-off on the view that in the year 1949-50, the assessee-firm was an unregistered firm while it had been registered under the Income-tax Act for the year 1950-51. The loss on account of depreciation of an unregistered firm cannot be carried forward to the succeeding year in case the firm gets registered in that year. This view it took on a plain reading of Section 10(2)(vi) and Clause (b) of the proviso to Section 24(2) of the Act.