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TMI Blog1962 (10) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... on business which is mainly speculation. In the year of account it claimed inter alia a loss of Rs. 1,05,641 which, it was said, arose in speculation in a venture of the assessee firm with one Damji Laxmidas. This venture was carried on in the name of Damji Laxmidas on behalf of an alleged firm in which Damji was said to have a share of 6 annas and the assessee firm the balance. A deed of partnership dated November 14, 1944, was also produced before the Income-tax Officer. The sum of Rs. 1,05,641 represented half the losses of the joint venture, the other half being claimed by Damji in his own individual assessment. The so-called firm of Damji Laxmidas and the assessee firm was an unregistered one. The Income-tax Officer, Bombay, disallowed the losses and added back this amount along with some others to convert a loss of Rs. 55,931 declared by the assessee firm into a profit of Rs. 1,88,575. This profit was carried by him in accordance with the share of the partners into their individual assessment. In the assessment of Damji, it may be stated here, the loss was not allowed on the ground that, having arisen in an unregistered partnership it could only be considered in the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that the transactions in question was not the transaction of the assessee ? (2) If not, whether the assessee can claim the set-off of such loss although it is the loss of an unregistered partnership ?" The first question arises out of the observations of the Judicial Member and the second question from those of the Accountant Member. The High Court answered both the questions against the department. It held that there was no legal admissible evidence to justify the finding that the transactions in question were not those of the assessee firm and further that the assessee firm could claim a set-off in respect of the share of loss in the unregistered firm "if the income-tax authorities do not proceed to determine the losses of the unregistered firm and do not bring it to tax as permitted by section 23(5)(b)." On the first question the appellant argues that the High Court has decided the case as an appeal court which it was not entitled to do. This is not a true representation of what the High Court did. Whenever the question propounded is whether there is any material on which a finding can be given the discussion savours of an appellate approach but it is not so. The High court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence exists at all. Even if there be slight evidence which was believed by the Tribunal and on which the conclusion can be rested, such question must be answered in the affirmative. But the finding must not proceed upon conjecture, suspicion or surmise. If there is not a scintilla of evidence, the finding cannot be sustained because the proved facts would not then support the inference. In this connection, the Income-tax officer gave three reasons. The most important of which being the ankdas were in the name of Damji. According to the deed of partnership, which has been produced in the case, the four partners of the assessee firm and Damji had entered into a partnership to do business together, specifying the share of the partners of the assessee firm which shares inter se are in the same proportion as their interest in the assessee firm. The new firm was not given a trade name. This is no doubt an unusual feature. But if no name was given then business could be carried on only in the name of names of one or more partners. That Damji name was chosen, and not any other, does not lead to the inference that business was not done. If Damji's name was used then it is reasonably clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee firm from Damji whether we take the reasons given by the Income-tax Officer individually or collectively. We are of the opinion that the High Court did not exceed its powers in examining the evidence in support of the inference of the Income-tax Officer that no business was done in company with Damji but the assessee firm took over some of his losses. The answer of the High Court to the first question is therefore upheld. This brings us to the second question and it is whether the assessee firm can set off the loss Rs. 1,05,641 against its other profits from its other business ? The High Court has held that it can do so. In our opinion, and we say it with great respect, the High Court was in error in reaching this conclusion. To begin with, the assessee firm as a firm could not enter into a partnership with Damji. Damji could be admitted into the assessee firm or the members of the assessee firm could enter into a partnership with Damji in their individual capacity. The assessee firm however could not do so as a firm. This is held by this court in Dulichand v. Commissioner of Income-tax [1956] 29 I.T.R. 535; [1956] S.C.R. 154There was thus a partnership between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions which must also be noticed. The first provision to notice is section 16(1)(b) which says that when the assessee is a partner of a firm, then whether the firm has made a profit or loss, his share (whether a net profit or a net loss) is to be computed in the stated manner and if his share so computed is a loss such loss may be set off or carried forward and set off in accordance with the provisions of section 24. Section 24 then provides for the set off the loss as well as the carrying forward of the loss. The second proviso deals with the question of set-off in relation to both registered and unregistered firms. It says that when the assessee is an unregistered firm (not assessed as a registered firm) the loss can only be set off against the income, profits and gains of the firm and not those of partners, but if the assessee is a registered firm, the loss which cannot be set off against the income, profits and gains of the firm shall be apportioned among the partners and they alone shall be entitled to have the amount of loss set off under the section. Shortly stated, the losses incurred by an unregistered firm can be set off only against its own profits while the net l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Privy Council in Arunachalam Chettiar v. Commissioner of Income-tax )[1936]4 I.T.R. 173; 63 I.A. 233 (a point almost conceded before us) is not a matter on which we need pronounce our opinion. That question does not arise for our consideration. The answer of the High Court to the second question is set aside and the question is answered in the negative. In view of the equal success, parties will bear their own costs here and in the High Court. SARKAR J. The respondent, a firm registered under the Income tax Act, 1922, claimed in its assessment to tax for the year 1946-47, a set-off for a sum of Rs. 1,05,641 as its share of the loss of another partnership said to exist between it and one Damji Laxmidas and which, for convenience, I will call the bigger partnership. The Income-tax Officer refused to allow the set-off on the ground that the existence of the bigger partnership had not been established. The respondent firm's appeal, first to the Appellate Commissioner and then to the Appellate Tribunal from the order of the Income-tax Officer failed. Thereafter, pursuant to an order obtained by the respondent firm from the High Court of Bombay, two questions were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax. [1953] 23 I.T.R. 82; [1953] S.C.R. 448 It is hardly necessary to point out that in the case of a single business its profits can only be ascertained after its losses have been taken into account. If this also is to be called a set-off, I suppose it may also be justified under section 10. It is clear that the set-off contemplated by this section is of a loss suffered by the assessee himself. That is not the position in the present case. The assessee, the respondent firm, has no interest, in the bigger partnership and, therefore, no concern with its losses. Sub-section (1) of section 24 also provides for set-off by an assessee of loss suffered by him under one head of income against the profits earned by him under another head. This section would not assist the respondent firm for the same reason as in the case of section 10 and also because it applies when two heads of income are being considered while in the present case we have only one head of income, namely, business. The second proviso to sub-section (1) of section 24 provides for certain rights of set-off in the case of assessment of unregistered and registered fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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