TMI Blog1940 (9) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the assessee and can be summarised, as the learned Commissioner has done, in one question. The question is:- Whether in the circumstances of the case the assessee was entitled under Section 14(2)(b) of the Income-tax Act to claim an exemption in respect of the amount of ₹ 59,011 received by him from the registered firm of Sadhuram Tularam at Calcutta when the firm itself was assessed to income-tax on a smaller sum, viz., ₹ 12,829 only. This question arises before us in connection with the assessment year 1934-35 when Seth Kanhaiya Lal was being assessed to income-tax by the Additional Income-tax Officer of Meerut. He was assessed on a total income of ₹ 59,371 and that income was made up as follows:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 12,829 and the firm was assessed on this income. From what is stated above it is clear that the firm had to pay large sums of interest to its three partners, and before the Income-tax Officer of Calcutta a submission was advanced on behalf of the firm that the profits or gains of the firm should be computed after making allowance for the amount of interest paid in respect of the advances made by the partners to the firm. The submission obviously was repelled by the Income-tax Officer of Calcutta, presumably on the view that the sums advanced or invested by the partners did not represent the capital borrowed by the firm for the purposes of the business. The question whether the Income-tax Officer of Calcutta was right in his method of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm can be exempted under Section 14(2)(b) only if the firm had made certain profits and those profits had been assessed to income-tax. Profits can be said to be assessed to income-tax only when an order has been made by the Department determining the sum payable by an assessee as income-tax and not when calculation only of the profits and losses have been made . The last sentence is tersely put and I take this opportunity of amplifying its meaning. Section 14 gives exemptions of a general nature and provides for relief in certain cases where but for that section there might have been double taxation. I am concerned at the present moment with Section 14(2)(b) which says that a tax shall not be payable by an assessee in respect of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, who is a partner in that firm, was not liable to be taxed in respect of any interest which he might have received from the Calcutta firm. The phraseology of Section 14(2)(b) does not lend support to this contention. If the Calcutta firm made any profits and if those profits were taxed, then the proportionate share of the profits in the hands of the assessee could not be re-taxed when the assessee's assessment was being made, and this is all that the section says and this relief has been given to the assessee in the present case. The Calcutta firm made a profit of ₹ 12,829; the assessee's one-third share in this profit is ₹ 4,276, and this amount of profit or income has not been re-taxed in the hands of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it was the intention of the Legislature in enacting Section 14(2)(b) that it should apply to any particular amount which may have been taken into consideration by the income-tax authorities in calculating the tax payable by the assessee firm-whether in fact income- tax was or was not found to be payable in respect to such amount. I did not accept that argument and the view which I intended to express was that the sub-section will only apply to such amount if it has actually been assessed to tax. By the Court.- The answer to the question referred to us is in the negative and, in our opinion, in the circumstances of the case the assessee is not entitled under Section 14(2)(b) of the Income- tax Act to claim exemption in respect t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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