TMI Blog1998 (7) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... on of persons could not be set off against the other income of the assessee. The assessee challenged this order of the Income-tax Officer before the Appellate Assistant Commissioner of Income-tax. The Appellate Assistant Commissioner reversed the finding of the Income-tax Officer and upheld the claim of the assessee for set off of the share of loss from the association of persons against her other income of that year. The Revenue appealed against the above order of the Appellate Assistant Commissioner to the Income-tax Appellate Tribunal ("the Tribunal). Following the decision of the Andhra Pradesh High Court in Smt. Abida Khatoon v. CIT [1973] 87 ITR 627 and the Madras High Court in CIT v. S. K. S. Rajamani Nadar [1977] 109 ITR 258, the Tribunal confirmed the finding of the Appellate Assistant Commissioner and dismissed the appeal of the Revenue. Hence, this reference at the instance of the Revenue. Mr. R. V. Desai, learned counsel for the Revenue, submits that the assessee being an individual can claim set off of loss suffered by her in the status as individual in respect of one source falling under any head of income against her income from any other source under the same head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 116 ITR 657, wherein a contrary view has been taken, are not correct. According to learned counsel, the above decisions of the Calcutta High Court are contrary to the decision of the Privy Council in Arunachalam Chettiar v. CIT [1936] 4 ITR 173 and the decision of the Supreme Court in Seth Jamnadas Daga v. CIT [1961] 41 ITR 630. The latest decision of the Supreme Court in ITO v. Ch. Atchaiah [1996] 218 ITR 239, according to him, has no bearing on the law laid down by the Andhra Pradesh High Court and the Madras High Court in the decisions cited above. We have carefully considered the rival submissions. Section 70 of the Act provides for set off of loss of an assessee from one source against his income from another source under the same head of income. This section, as it stood at the material time, so far as relevant, reads : "70, Set off of loss from one source against income from another source under the same head of income.---(1) Save as otherwise provided in this Act, where the net result for any assessment year in respect of any source falling under any head of income other than 'capital gains' is a loss, the assessee shall be entitled to have the amount of such loss set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of this Act; (iii) every person who is deemed to be an assessee in default under any provision of this Act; "Person" has been defined in clause (31) of section 2 of the Act to include,--- (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses; Section 4 of the 1961 Act, which is the charging section, at the material time, read as follows : "4. Charge of income-tax.---(1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year or previous years, as the case may be, of every person." It is clear from a conjoint reading of the above provisions that the charge is on every person including an association of persons which is an assessable entity different and distinct from its members. The benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he association of persons or on the partners of the firm or on the members of the association of persons individually. It is evident that this option was to be exercised by him keeping in view the interests of the Revenue. Whichever course was more advantageous to the Revenue, he was entitled to follow it. In such a situation, it was generally held that once the Income-tax Officer opted for one course, the other course was barred to him. But no such option is provided to him under the present Act. Section 4 extracted hereinabove says that income-tax shall be charged on the total income 'of every person' and the expression 'person' is defined in clause (31) of section 2. The definition merely says that the expression 'person' includes, inter alia, a firm and an association of persons or a body of individuals whether incorporated or not. There are no words in the present Act which empower the Income-tax Officer or give him an option to tax either the association of persons or its members individually or for that matter to tax the firm or its partners individually. If it is the income of the association of persons in law, the association of persons alone has to be taxed; the members o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court in ITO v. Ch. Atchaiah [1996] 218 ITR 239. We have also considered the decision of the Andhra Pradesh High Court in Smt. Abida Khatoon v. CIT [1973] 87 ITR 627, wherein it was held that there was no provision preventing a member of the association of persons from setting off his share of the loss in the association of persons against his other income and that the assessee was entitled to set off her share of loss in the association of persons against her income under other heads and the decision of the Madras High Court in CIT v. Rajamani Nadar (S. K. S.) [1977] 109 ITR 258, wherein also it was held that there was no provision preventing the members of the association of persons from setting off their share of loss in the association of persons against their individual income from other sources. These decisions were rendered following the ratio of the decision of the Privy Council in Arunachalam Chettiar v. CIT [1936] 4 ITR 173 and the decision of the Supreme Court in Seth Jamnadas Daga v. CIT [1961] 41 ITR 630, which were cases under the 1922 Act. In those cases, the distinction between the provisions of the 1922 Act and the 1961 Act was not brought to the not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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