COMMISSIONER OF INCOME-TAX BOMBAY CITY III BOMBAY Vs. DHARAMDAS HARGOVINDAS BOMBAY

JUDGEMENT

(1.) The following three questions, the first two relating to assessment year 1953-54 and the third one relating to assessment year 1954-55, have been referred to us for our opinion at instance of the Commissioner of Income-tax, Bombay City III, Bombay :

(2.) The material facts so far as the first question is concerned are these : The question relates to the assessment year 1953-54, the relevant previous year being S.Y. 2008 corresponding to 31-10-1951. The two individual assessees Shri Dharamdas and Shri Gordhandas who are brothers, entered into an agreement on 21-12-1951 with Jamnadas Dayalji Boda and Chandrakant Dayalji Boda trading in the name of M/s. Gopalji Ratanshi. Under the said agreement Shri Dharamdas and Shri Gordhandas agreed to carry on certain business as a joint venture business in Mulmul of Universal Mill on terms and conditions mutually agreed upon between the said two brothers and the said Boda brothers. The joint venture business was to deal in quantity between 150 and 200 bales of mulmul. Dharamdas and Gordhandas were to supply the finance and profit or loss was to be shared equally between Dharamdas and Gordhandas on the one hand and Boda brothers on the other and the joint venture was to terminate on the sale of Mulmul bales minimum being 150 bales and maximum being 2oo bales of mulmul that were to be purchased from Universal Mill. It appears that the joint venture ran into losses and Boda brothers out of the business after suffering heavy losses and they seem to have left Bombay to evade creditors. The loss that accrued to Dharamdas and Gordhandas as a result of the arrangement under agreement dated 21-12-1951 came to Rs. 92,986.99 with the result that each one of them viz. Dharamdas and Gordhandas claimed one half of the same viz, Rs. 46,483/- as loss allowed in each one's individual assessment fro the year 1953-54. The Income-tax Officer disallowed this loss on the ground that it was not genuine and also on the ground that as it was an unregister firm it could not be considered for the individual assessment. The first ground need not detain us any more because of the fact that the Tribunal has recorded a finding that the loss was genuine. On appeal by Dharamdas and Gordhandas to the Appellate Assistant Commissioner, the latter on perusal of the agreement dated 21-12-1951, details in the statement of account and other attendant circumstances held that there was no material justifying disallowance of the loss. The department carried matter in second appeal to the Tribunal and the contention of the department before the Tribunal was that said loss could not be allowed in the individual assessment in view of the second proviso to section 24(1) of the Indian Income-tax Act, 1922 and in support reliance was placed on the decision of the Supreme Court in (1963) 48 I.T.R. 41 (Commissioner of Income-tax vs. Jadhavji Narsidas & Co.). On behalf of the individual assessee reliance was placed upon the decision of this Court in (1953) 55 I.T.R. 128 (Commissioner of Income-tax vs. Jagannath Narsinghdas) and it was contended that in view of that decision the was properly allowed and there was nothing in the second proviso to section 24(1) to prevent such allowance. The Tribunal following the law laid down by this Court in 55 I.T.R. 128 as well as by the Supreme Court in (1962) 44 I.T.r. 710 (Commissioner of Income-tax vs. Muthuraman Chettiar) held that the loss was allowable under section 10 of the Income-tax Act and nothing contained in the second proviso to section 24(1) of the Act prevented such allowance. It therefore upheld the order of the A.A.C. At the instance of the Commissioner the first question set out above has been referred to us for our opinion.

(3.) Mr. Joshi appearing for the Revenue fairly conceded before us that the question was clearly covered by the decision of this Court in the case of Commissioner of Income-tax vs. Jagannath Narsinghdas reported (1965) 55 I.T.R. 128, but he urged that in view of Full Bench decision of the Allahabad High Court in the case of Raza Buland Sugar Co. Ltd. vs. Commissioner of Income-tax, Delhi (Central) reported in (1976) 102 I.T.R. 451 : 1975 CTR (All.) 169 which in its turn had referred to some observation of the Supreme Court in certain applications which were preferred before it, the view taken by this Court in 55 I.T.R. 128 could not be followed by this Court. It is not possible to accept this contention of Mr. Joshi for the reason which we shall presently indicate.