Gujarat High Court
Pravinbhai Mohanbhai Kheni vs Assistant Commissioner on 8 January, 2013
Author: Akil Kureshi
Bench: Akil Kureshi
PRAVINBHAI MOHANBHAI KHENI....Appellant(s)V/SASSISTANT COMMISSIONER - INCOME TAX - CENTRAL CIRCLE - 2....Opponent(s) O/TAXAP/181/2012 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 181 of 2012 ================================================================ PRAVINBHAI MOHANBHAI KHENI....Appellant(s) Versus ASSISTANT COMMISSIONER - INCOME TAX - CENTRAL CIRCLE - 2....Opponent(s) ================================================================ Appearance: MR RK PATEL, ADVOCATE for the Appellant(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI Date : 08/01/2013 ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. The assessee is in appeal against the judgment of the Income Tax Appellate Tribunal dated 21.10.2011 raising following questions for our consideration:-
(1) Whether on facts and in the circumstances of the case, the Tribunal is right in law in interpretation of Section 28 read with Section 37 in confirming the disallowance of Rs.9,99,41,056/- on account of Forex Trading Loss in Foreign Currency Transactions against export business in case of the appellant as well as the partner of the appellant firm?
Whether in the facts and in law, the Tribunal is right in appreciating/ disregarding evidence on record in arriving at findings and conclusions in confirming the Forex Trading Loss in Foreign Currency Transactions of Rs.9,99,41,056/-?
(3) Whether on facts and in law, the Tribunal is right in confirming the disallowance of Forex Trading Loss in Foreign Currency Transactions incurred in the course of business and resulting into Embezzlement Loss to the appellant firm having nexus with the conscious action taken by the partner of the firm on behalf of the firm?
2. Broadly stating facts are that the appellant assessee was a partner in one M/s. M. Kantilal Exports. Partnership firm was engaged in the business of diamond exports. During the previous year relevant to the assessment year 2007-08, the appellant, for and on behalf of the partnership firm, entered into several foreign currency transactions, which resulted into a total loss of Rs.9,99,41,056/- on account of foreign exchange trading loss. The assessee claimed such loss from his business income. It was contended that such transactions were entered into without the knowledge and consent of other partners and, therefore, the same should be treated as the personal loss of the partner.
We may notice that alternatively the firm also claimed deduction of the loss from its business profits. The Tribunal, by the impugned common judgment, disallowed the loss so claimed in case of both the individual partner as well as the firm.
By separate order passed today, we have admitted appeal of the partnership firm. In so far as the present appeal of the individual partner is concerned, the Tribunal rejected the claim making following observations:-
8. We have considered the rival submissions, perused the material on records and have gone through the orders of authorities below and the judgments cited by the Ld. A.R. First we decide as to whether the claim of the assessee in the hands of Shri P.M. Kheni, a partner of the firm M/s. M. Kantilal Exports is allowable or not. We find that in para 4.4 of the assessment order, it is held by the A.O. that there is no provision in the Act to allocate the loss of a firm only to a partner but the same is required to be adjusted against other income of the firm. The A.O. has noted that even the contract note/ certificate issued by the banks in respect of the loss on forex trading is in the name of the firm and the amount invested for such treading is from the funds of the firm only and therefore, individual assessee being a partner of the said firm, cannot claim such loss in his case merely by passing internal entry and debiting his account with the firm. There is no dispute regarding the facts and under these facts, we are of the considered opinion that no interference is called for in the orders of authorities below in the case of the individual Shri P M Kheni because when the loss has been incurred by investing the funds of the firm and the contract notes are also in the name of the firm, such loss cannot be claimed by individual being a partner of the firm. Hence, ground No.1 of the appeal in the case of individual P M Kheni is rejected.
5. We are broadly in agreement with the view of the Tribunal. It is undisputed that the investment was made in the name of the firm. The amount invested was also from the account of the firm. The partner, therefore, cannot individually claim any deduction of such loan in the individual capacity. Section 13 of the Partnership Act provides, inter alia, that subject to the contract between the partners, partnership firm shall indemnify the partner in respect of the payments made and liabilities incurred by him in the ordinary and proper conduct of the business and in doing such act, in an emergency for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances.
In the result, we do not find any justification for entertaining this appeal of the partner, particularly, when we are examining the same claim made by the firm.
In the result, Tax Appeal is dismissed.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) SUDHIR Page 4 of 4