TMI Blog1985 (9) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... Sri Ram Mahadeo Mills. The said Prem Shankar died on or about July 24, 1959, leaving his widow, Smt. Saroj Agarwal, who is the assessee in the present appeal. After the death of Prem Shankar, Smt. Saroj Agarwal, the assessee herein, joined the partnership in which her husband was a partner before his death. It is necessary, in view of the contentions raised in this appeal, to refer to the partnership deed between the deceased husband of the assessee and his partners. The deed was dated July 30, 1957. It described the three partners-one being L. Hari Shankar and the others being L. Gauri Shankar and the third being L. Prem Shankar, the deceased husband of the assessee. On behalf of the assessee it was stressed before us, as was apparent from the deed, that they all had the same address as described in the said partnership deed. This was pointed out to stress the point that they were members of a joint Hindu family. The recital in the said deed stated that they had been carrying on business since July 9, 1956, and the partnership deed was executed on July 9, 1956, and thereafter one Baijnath, who was also a partner as per the deed of July, 1956, had retired and the parties mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he death of a partner. The legal representative of the deceased shall come in his place as partner. " This deed clearly stipulated that the firm would continue to be run under the above name and style and/or in such other names at Kanpur or at such other places as the parties might from time to time determine, and would not be dissolved on the death of a partner. It altered, the proportionate share of profits and loss which became necessary due to admission to the benefits of partnership of some minor partners. There is another subsequent deed of partnership, which it is not material for our present purpose, to be referred to. For the assessment year 1962-63, the Income-tax Officer while making the assessment on the assessee included under section 64 of the Income-tax Act, 1961, in her total income, the share income as well as the interest earned by the minor adopted son from the partnerships to the benefits of which the minor son was admitted. Prem Shankar, since deceased, while he was a partner had an unabsorbed loss of Rs. 25,914 from speculation suffered as a partner of the firm, M/s. Hari Shankar Gauri Shankar Rice Dal Mills. It so appears from the order of the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had succeeded her husband as a partner and her son had also succeeded his father as he was admitted to the benefits of partnership on his father's death and, therefore, the share of speculation losses of Prem Shankar should have been set off against the assessee's and minor son's share of speculation profits in the assessment year under appeal. In the alternative, it was contended that in any case as the minor's share of speculation profits had been considered as the assessee's share and since the assessee had succeeded her deceased husband, the set-off was allowable against the minor's share of profits too. The Appellate Assistant Commissioner while dealing with this contention of the assessee held that there could be no succession or inheritance in respect of membership of a firm and that on the death of husband or father, the wife or the son might be admitted into the partnership by the remaining partners not because they had an inherited right to join the firm but because the remaining partners were agreeable to their joining the firm and that on such death, the wife or the son might inherit the capital left by the deceased in the firm and the wife or the son might have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inued. It, appears not only that it was the factual position but also it was intended to be so because of the natural inference that follows from the relationship of the parties. The Tribunal allowed the assessee's appeal. From the said decision of the Tribunal, there was a reference before the Allahabad High Court under section 256(2) of the Act at the instance of the Revenue, referring the following question for the opinion of the High Court: " Whether, on the facts and in the circumstances of this case, the assessee was entitled to the set-off of speculation losses brought forward from earlier years against the speculation profits of the assessment year under appeal ?" The High Court set out the facts which counsel for the assessee sought to challenge on the ground that most of the facts were not those as found by the Tribunal. We do not find any material or any significant difference between the facts found by the Tribunal and the facts narrated by the High Court, so far as the material question involved in this case is concerned That is the reason why the facts as found in the statement of the case have been set out hereinbefore in such extensive manner, even though thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital he had brought into the partnership, the relation which subsisted between H J, and the conduct of j and the assessee. The Tribunal gave the benefit of section 24(2) of the Indian Income-tax Act, 1922, which, in material respects with reference to the controversy in the present case, is similar to section 78(2) of the Act and allowed the set-off claimed by her. The Bombay High Court, on a reference, held that the assessee had succeeded by inheritance to H's capacity as partner. It further held that the Tribunal's conclusion was one on a question of fact and having regard to the evidence, the court would not be justified in interfering with that conclusion. The assessee was, therefore, entitled to set off against her share of the profits, the losses suffered by the assessee's husband in 1953-54 and 1954-55. The Bombay High Court noted that the sole question decided in that case was whether Bai Maniben had by inheritance succeeded to her husband, Hiralal, in the firm. The High Court noted the significant facts noted by the Tribunal. There are significant similarities and there are significant dissimilarities also between the facts of the present case and the facts of Bai Mani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore assessment and the family business devolved on B by survivorship. Held, that B did not " succeed " to the business within the meaning of section 26(2) of the Income-tax Act and B was not liable to be assessed as successor under section 26(2), but what happened was that a co-owner became a full owner by survivorship. In the case of Executors of the Estate of J. K. Dubash v. Commissioner of Income-tax [1951] 19 ITR 182 (SC), this court had to consider the provisions of section 25(4) and section 26(2) of the Indian Income-tax Act, 1922. In view of the facts involved in that case, it is not material to discuss in detail that decision. In the case of Commissioner of Income-tax v. A. W. Figgies and Company [1953] 24 ITR 405, the provisions of section 25(4) of the Indian Income-tax Act, 1922, came up for consideration by this court and it was held that a mere change in the constitution of a partnership did not necessarily bring into existence a new assessable unit or a distinct assessable entity and in such a case, there was no devolution of the business as a whole. The assessee, partnership firm, carrying on a business consisted of throe partners when it paid tax under the India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtners had exercised their option to continue the partnership by taking the heirs of the deceased partners by way of inheritance. In such a case, section 24(2)(iii)(e) of the Indian Income-tax Act, 1922, applied and the heirs of J could set off the losses suffered by their father for the assessment year 1958-59. The decision of the Bombay High Court in CIT v. Bai Maniben [1960] 38 ITR 80 was followed. It was urged on behalf of the Revenue that in that case the partnership deed provided in specific terms that the death of a partner would not dissolve the partnership and option was given to the partners to continue the partnership on the death of one of the partners. It was urged that such is not the position in the instant case. But, in our opinion, that does not make any significant difference. In the instant case, the conduct of the parties in the absence of any specific clause preventing such a construction would not prevent the court from drawing such an inference if the facts so warrant. In the case of CIT v. Madhukant M. Mehta [1981] 132 ITR 159 (Guj), the question involved was different. The decision under appeal was referred to by the Gujarat High Court at page 182 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a partner or partners and there was a right of the deceased partner's wife or heirs to join the partnership firm. If that is the position, then, in such a case, the facts of this case stand on the same footing as the facts in CIT v. Bai Maniben [1960] 38 ITR 80 (Bom). Facts should be viewed in natural perspective, having regard to the compulsion of the circumstances of a case. Where it is possible to draw two inferences from the facts and where there is no evidence of any dishonest or improper motive on the, part of the assessee, it would be just and equitable to draw such inference in such a manner that would lead to equity and justice. Too hypertechnical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered. It is true that there must be succession by inheritance. But it is possible in a particular case without any express provision either in the deed or in writing to infer from the conduct of the parties that there was succession, and if such a view is possible in spite of the absence of an express provision, in our opinion, such an inference could be and should be drawn. Courts should, whenever possible, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
