1960 (12) TMI 9

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....s are brothers and the third appellant is the widow of a third brother, who died during the pendency of the appeal after certificate had been granted by the High Court. The three brothers were partners in two registered firms and one other firm, which was unregistered. The assessment years for the purposes of the appeal are 1948-49 and 1949-50. For the assessment year 1948-49 the income of the three brothers was the same and it was as follows : From registered firms ... Rs. 11,902 loss 1,265 loss ---------- Total loss Rs. 13,167 ---------- Income from the unregistered firm Rs. 26,110 profit Other income Rs. 262 The income of the unregistered firm was taxed on the firm and not in the hands of the partners, as was possible und....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

...., which it purported to follow in preference to a decision of the Punjab High Court in Banka Mal Niranjandas v. Commissioner of Income-tax . The same reasoning was applied to the assessment year 1949-50 and, in the result, all the six appeals were allowed. The order of the Tribunal involved, in addition to the point set out above, certain other questions, which were asked by the assessees to be referred to the High Court for decision under section 66(1). The Commissioner also asked for a reference in respect of the decision, the substance whereof has been set out above. The Tribunal referred two questions at the instance of the assessees and one question, which we have already quoted, at the instance of the Commissioner. In the High Court, ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....fore its amendment in 1956, provided that the tax shall not be payable by an assessee, if a partner of an unregistered firm, in respect of any portion ; of his share in the profits and gains of the firm computed in the manner laid down in clause (b) of sub-section (1) of section 16 on which the tax had already been paid by the firm. The section thus gave immunity from tax to the share of the assessee as a partner in an unregistered firm in respect of the share of profits received by him from the unregistered firm and on which the unregistered firm had already been taxed. Section 16(1)(a), however, provided that in computing the total income of an assessee, any sum exempted under sub-section (2) of section 14 shall be included. The combined ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....n about loss was held to apply the other way round also. The High Court correctly pointed out that all that section 14, sub-section (2), did was to save the profits of an unregistered firm from liability to tax in the hands of the partners. It did, not affect the computation of the total income to determine the rate applicable under section 3, in the light of section 16(1)(a). Indeed, section 16(1)(a) clearly provided that any sum exempt under section 14(2) was to be included in computing the total income of an assessee and, in view of this specific provision, the converse of the second proviso to section 24(1) which we have quoted above, hardly applied. To this extent, the order of the Tribunal was incorrect. The error was pointed out by t....