TaxTMI 
TaxTMI 
1977 (8) TMI 47
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....g the period November 3, 1956, to October ,23, 1957). Shamsunder, the assessee is the son of one Juthalal Motilal. Juthalal was a partner in three firms, namely, (1) M/s. Chimanram Motilal (Cotton & Wheat), (2) Chimanram Motilal (Gold & Silver), and (3) M/s. Kamlapat Juthalal died on October 22, 1955, having him surviving his four heirs, including the assessee. The assessee inberited one-fourth of his father's share of interest in the three firms referred to above. In the assessment years up to 1956-57 all the three firms were assessed as registered firms. There were certain losses and those losses had been apportioned amongst the partners including Juthalal. In the assessment for the year 1958-59, the assessee claimed that to the extent to which he had succeeded to his father's interest in the said firms the share of loss apportionable to the father was liable to be allowed in his hands under section 24(2)(iii)(e) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the Act"). The Income-tax Officer rejected the contention for a set-off of the losses incurred in the earlier years so far as the assessee was concerned. According to him such set-off was not permissible ....
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....Mr. Joshi, on behalf of the revenue, submitted that the benefit of section 24(2)(iii)(e) can only be available if the assessee was taken up as a partner in the new firm by way of inheritance. His submission was that if regard be had to the terms of the original deed of partnership and the new deed of partnership that was entered into after the death of Juthalal, it is quite clear that as a result of a separate and independent agreement the assessee had become a partner and he was not admitted as a partner simply by reason of inheritance and the benefit of set-off given by the Tribunal was not justified under the provisions of section 24(2)(iii)(e). So far as the decision of this court in Bai Maniben's case [1960] 38 ITR 80 (Bom) was concerned, he submitted that the case was decided on its own facts and cannot be regarded as an authority for the present case if regard be had to the original deed of partnership under which Juthalal was a partner and the fresh deed of partnership that was entered into after his death. Section 24 of the Act provides for set-off Of loss in computing aggregate income. We are concerned in the present case with the provisions of section 24(2)(iii)(e) an....
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.... of his father. All the three firms in which Juthalal was partner had similar deeds of partnership. It will suffice for the present purpose if we refer to the partnership agreement of the firm of Chimanram Motilal (Cotton & Wheat). That agreement was entered into on June 1, 1949 between three partners, namely, Juthalal, who later on died, Vishnudayal Dwarkadas and Mahabirprasad Juthalal, one of the sons of Juthalal. The three partners were to share the profits and bear the losses the following proportion : Rs. Juthalal 0-6-0 in a rupee Vishnudayal Dwarkadas 0-6-0 in a rupee Mahabirprasad 0-4-0 in a rupee It is necessary for the present case to refer to two of the terms of this partnership agreement, namely, clauses (3) and (6), which are as under: " (3) The partnership shall be a partnership at will terminable by any partner on his giving to the others three months' previous notice of his intention so to do. (6) The death of any partner shall not dissolve the partnership. On the death of any partner unless the surviving partners otherwise decide, the share of the deceased partner shall be continued up to the end of the accounting year in which he dies after ....
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....t the surviving partners decided to take the heirs of the deceased partner, Juthalal, as partners by way of inheritance. In this new agreement it is, inter alia, stated that consequent on the death of Juthalal his Rs. 0-6-0 share in the old partnership devolved by inheritance on his four heirs, one of them being a minor, and further it states that the parties to the new agreement agreed to continue with effect from October 23, 1955, the business together in partnership with Arunkumar alias Kailashpat, being minor admitted to the benefits of the partnership, on terms and conditions and in the manner laid down in the said deed. Thus, it is quite clear that as option was given to the surviving partners under the earlier partnership agreement to continue the partnership by taking heirs of deceased partner as partners by way of inheritance, they have chosen to do so. Thus, in the present case, the heirs of Juthalal had acquired rights as partners in the new firms that were constituted after the death of Juthalal by way of inheritance, and when such is the case the right of set-off will be available to them under section 24(2)(iii)(e) of the Act. That such is the clear position in law....