Jurisdictional objections in income-tax assessments must be raised at the assessment stage; partner's profit share is exempt only after firm-level tax assessment.

A jurisdictional objection to an income-tax assessment had to be raised before the Income-tax Officer at the assessment stage, because the appellate and reference provisions did not extend to the place of assessment; the post-assessment challenge to territorial jurisdiction was therefore not maintainable. A partner's share in firm profits was exempt only where the firm's profits had actually been assessed to income-tax, not merely computed. As the firm had not been assessed to tax and had in fact suffered a loss, the claimed exemption failed and the amount was correctly treated as taxable income in the partner's hands.

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Issues: (i) whether the assessee could, after assessment, raise and have referred to the High Court the objection that the assessing officer lacked territorial jurisdiction; and (ii) whether the sum treated as the assessee's share in the firm was correctly assessed and exempt from tax under the provision relating to a partner's share in profits already assessed to income-tax.

Issue (i): whether the assessee could, after assessment, raise and have referred to the High Court the objection that the assessing officer lacked territorial jurisdiction.

Analysis: The statutory scheme placed the place of assessment question within the assessment process itself under the provision dealing with jurisdiction and required any such objection to be taken before the Income-tax Officer at the earliest stage. A post-assessment challenge was not within the assessee's appellate competence, because the appeal provision permitted objection only to liability, amount, or rate of assessment and not to the place of assessment. The reference sought on this point was therefore outside the scope of the statutory reference jurisdiction.

Conclusion: The jurisdiction objection could not be validly raised at the post-assessment reference stage and the answer was against the assessee.

Issue (ii): whether the sum treated as the assessee's share in the firm was correctly assessed and exempt from tax under the provision relating to a partner's share in profits already assessed to income-tax.

Analysis: The amount received by the partner represented his share in the firm's profits and was assessable as income in his hands. The exemption for a partner's share applied only where the firm's profits had actually been assessed to income-tax; mere computation of profits and losses without an assessment to tax did not satisfy that condition. On the facts, the firm had suffered a loss and had not been assessed to income-tax, so the statutory exemption did not apply. The amount was therefore correctly treated as taxable income of the assessee.

Conclusion: The assessment of the amount was correct and the claim to exemption failed, against the assessee.

Final Conclusion: The reference was answered substantially in favour of the Revenue, with the jurisdiction challenge rejected and the disputed amount held taxable in the assessee's hands.

Ratio Decidendi: A jurisdictional objection under the income-tax assessment scheme must be taken at the assessment stage itself, and a partner's share is exempt only when the firm's profits have actually been assessed to income-tax, not merely computed.

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