TMI Blog1961 (3) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... ership shows that the capital required for the partnership business was to be provided by the assessee. It was further provided that the partnership was take over the running business of he assessee and was to take over the assets and liabilities of the business at book value as shown in the balance-sheet. It was provided further that each partner was to devote his whole time and attention to the business of the partnership. This partnership was registered under the provisions of section 26A of the Income-tax Act. For the assessment year 1955-56, the accounting year being Samvat year 2010, the income of the partnership was determined at ₹ 14,546 and a sum of ₹ 9,091 came to the share of the assessee. The assessee claimed to set off as against this sum of ₹ 9,091 the loss incurred by him during Samvat year 2009. The Income-tax Officer allowed the assessee to set off the amount of such loss. The assessee had income from other sources for Samvat year 2009 which was assessed at ₹ 13,446. For the assessment year 1956-57, the accounting year being Samvat year 2011, the income of the firm was assessed at ₹ 31,391. The firm was registered for this ear also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n partnership with another against his share of profit in the firm? Section 24(2) in so far as it is relevant provides as under: 24. (2) Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st March, 1940, in any business, profession or vocation, and the loss cannot be wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried for ward to the following year, and (i) where the loss was sustained by him in a business consisting of speculative transactions, it shall be set off only against the profits and gains, if any, of any business in speculative transactions carried on by him in that year; (ii) where the loss was sustained by him in any other business, profession or vocation, it shall be set off against the profits and gains, if any, of any business, profession or vocation carried on by him in that year: provided that the business, profession or vocation in which the loss was originally sustained continued to be carried on by him in that year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the assessee as a running business together with all the assets and liabilities of that business. By clause 14 of the deed of partnership it is provided that in the event of the dissolution of the partnership all the goodwill rights and trade name would revert to the assessee who would be entitled to continue the business thereafter as he thought best. From the deed of partnership it appears that it was the intention of the parties to maintain the continuity of the business. The intention was not merely to maintain such continuity during the subsistence of the partnership but it was the further intention of the parties that in the event of the dissolution of the partnership, the assessee was to be at liberty to continue the said business thereafter if he so desired. Reliance was placed by Mr. Parikh, the learned advocate for the assessee, upon a decision of the Supreme Court in Commissioner of Income-tax v. A.W. Figgies and Co. [1953] 24 I.T.R. 405 (S.C.). That was a case under the provisions of section 25(4) of the Indian Income-tax Act, 1922. In that case a partnership firm consisting of three partners carried on business and paid tax under the Indian Income-tax Act, 1918 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and his partner is Samvat years 2010 and 2011. The learned Advocate-General contended that a business which is carried on by a firm cannot be said to be the same business as the one carried on prior thereto by one of its partners. We are unable to accept this contention of the learned Advocate-General. What we have to consider is whether the business that had been originally carried on had been continued. The activity that was being carried on by the assessee and the individual was continued by the assessee and another in partnership. The business remained the same. Only there was a change in the persons who carried on that business. The identity of the business would not change merely by reason of the change in the persons who carry on that business. We shall next deal with the point whether a business which has been carried on by a partnership could be regarded as a business carried on by a partner. A partnership is defined by section 4 of the Indian Partnership Act as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. When a firm carries on business, it is a business carried on by the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us that a firm was an entity under the Income-tax Act separate from the individuals who constituted that firm. So far as unregistered firms are concerned, that no doubt is true. An unregistered firm is assessable to tax as a firm and is constituted an entity under the income-tax law. When we are concerned with registered firms, we have to examine the relevant provisions relating to registered firms as they existed during the relevant assessment year. Section 23(5) as it existed during the relevant assessment years ran as under: Notwithstanding anything contained in the foregoing sub-sections, when the assessee is a firm and the total income of the firm has been assessed under sub-section (1), sub-section (3) or sub-section (4), as the case may be,-- (a) in the case of a registered firm, the sum payable by the firm itself shall not be determined but the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, shall be assessed and the sum payable by him on the basis of such assessment shall be determined. In the present case we are concerned with a registered firm. It is clear from this provision that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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