Income Tax Appellate Tribunal - Nagpur
Seth Badridas Daga And Another vs Commissioner Of Income-Tax, C. P. & U. P. on 11 February, 1944
Equivalent citations: [1944]12ITR468(NAG)
JUDGMENT
The following questions have been referred to us under Section 66(1) of the Income-tax Act :-
"(1) Where the total income of a resident and registered firm of Rai Bahadur Bansilal Abirchand has been computed by including in its income, profits and gains accruing or arising to it without British India in accordance with the provisions of Section 4(1) (b) of the Indian Income-tax (Amendment) Act, 1939, and is thereafter apportioned among its partners for inclusion in their individual assessments under Section 23(5) (a) of the Act, whether Seth Badridas Daga, who is a "resident but not ordinarily resident" partner of the resident firm, is entitled to treat his proportionate share of the profits so included as profits accruing or arising to him outsides British India so as to entitled him to the benefits of proviso (2) to Section 4(1) of the Act ? (2) Where the total income of a resident and registered firm of Rai Bahadur Bansilal Abirchand has been computed by including in its income, profits and gains accruing or arising to it without British India in accordance with the provisions of Section 4(1) (b) of the Indian Income-tax (Amendment) Act, 1939, and is thereafter apportioned among its partners for inclusion in their individual assessments under Section 23(5) (a) of the Act, whether Seth Ramnath Daga, who is a "non-resident" partners of the resident firm, is entitled to exclude from his total income such proportionate share of the profits of the said firm which accrue of arise to it without British India, under Section 4(1) (c) of the Act ?"
The Income-tax Officer acting under sub-section (1) or (3) or (4) of Section 23 is required to assess the total income of the assessee and to determine the sum payable by him on the basis of such assessment. Where, however, the assessee is a registered firm, then a somewhat modified procedure is prescribed by sub-section (5) (a) of Section 23, and the Income-tax Officer, after assessing the total income of the firm under sub-section (1) or (3) or (4), is then required to determine not the sum payable by the firm itself but the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, and to determine the sum payable by him on the basis of such assessment. The total income of the firm and the share of each partner in it are not disputed in the present case. In our opinion, the plain meaning of clause (a) of sub-section (5) is that the Income-tax Officer in computing the total income of each partner of the firm shall include therein his share of its income, profits and gains. It has been contended that his share of its income is not immutable and we have been referred to Section 16 (1) (b), but that merely lays down how his share shall be calculated. The decisions of this Court in Mohan Lal v. Commissioner of Income-tax, and of the Calcutta High Court in In the matter of Babu Raman Lal Kondai, are not precisely in point but the line of reasoning there adopted leads to the conclusion adopted by the Income-tax Appellate Tribunal in this case. The word "assessed" used in clause (a) of Sub-section (5) of Section 23 means, in our opinion, computed, and there is no room for the construction that a partners share of the firms income shall be calculated as if it were the separate income of an individual; nor do we see any particular unfairness in treating persons who have formed a partnership for carrying on business in British India as persons resident in British India so far as their profits in that partnership are concerned. Our answer to both questions referred to us is in the negative. The costs of this reference must be paid by the applicants. Counsels fee Rs. 100/-.
Reference answered in the negative.