TMI Blog1964 (3) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 25,000 to be contributed equally by the five partners. The five partners shared equally in the profit and loss. This firm was registered under the Income Tax Act. Now, there was another concern which was a private limited company doing the same business under the name and style of Messrs. Manoharsingh Sethi and Co. (P.) Ltd. This limited company will be hereafter referred to a Manoharsingh Limited. Manoharsingh Limited had secured a contract from the Government for building a High School and hostel at Arvi. Hirani firm and Manoharsingh entered into a partnership for the contraction of the said High School and hostel. A regular deed of partnership was entered into evidencing the terms and conditions on which Hirani firm and Manoharsingh Limited agreed to do the business. The said deed is of February 26, 1956. The deed, inter alia, provided : It is further provided that the company (i.e., Manoharsingh Limited) may take the firm (i.e., Hirani firm) as its partner in other contract works also after having obtained the written consent of the firm, on the terms and conditions as provided in the deed. This deed has been signed on behalf of Manoharsingh Limited by Manoharsingh who w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antial profit. And whereas the parties have decided to sever their connections, and have decided that the partnership between them subsisting under the deed dated February 26, 1956, for carrying out the aforesaid two contracts at Arvi and Chanda be dissolved by mutual consent as from the date hereof on terms and conditions hereinafter appearing : (2) (i) The actual loss in the Arvi contract cannot be definitely calculated at this stage. However, by mutual consent and for dissolving the partnership amicably, the loss is finally fixed at ₹ 54,000 (Rs. Fifty-four thousand) and the share of the party No. 2 in it is accordingly fixed at ₹ 27,000 (Rs. Twenty-seven thousand only) irrespective of the fact it ultimately the actual loss may be more or less. (ii) Party No. 2 has invested in all a sum of ₹ 60,693 (Rs. sixty thousand, six hundred and ninety-three) far for the Arvi contract Deducting their share of loss of ₹ 27,000 from the total investment of ₹ 60,693 of party No. 2 in the Arvi contract, the party No. 2 is entitled to receive ₹ 33,693 (Rs. thirty-three thousand, six hundred and ninety-three only) out of its investments in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Manoharsingh Limited by Hirani Firms by way of adjustment against the balance in the said deposit and further paying in cash the remaining amount of ₹ 11,307. As and from October 5, 1957, the partners in the Hirani Firm got exclusive right, title and interest in the contract of construction of the Normal School building at Chanda. 5. We may now turn to the assessment proceedings of Hirani Firm and the assessment proceedings of M. H. Entity. We have already said that the business of M. H. Entity commenced on February 26, 1956, and continued till 5th or 9th October, 1957. The periods of work of M. H. Entity are three assessment years 1956-57, 1957-58 and 1958-59. Though we are here concerned only with the assessment year 1958-59, it is necessary to state in brief the history relating to the assessment of earlier years also. We will first deal with assessment proceeding relating to M. H. Entity. This M. H. Entity had been assessee for all the three years in the status of an unregistered firm. For the assessment year 1956-57, it was assessee to a total income of ₹ 3,100.80 nP. In the assessment year 1957-58, the business resulted in a loss amounting to ₹ 30, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer disallowed its claim. The order of the Income Tax Officer was affirmed in appeal by the Appellate Assistant Commissioner. The assessee, Hirani Firm, appealed to the Tribunal and the contention raised before the Tribunal by it was that it should be entitled to a set-off of the loss of ₹ 27,000 determined as its share of loss in the partnership against its share of other income. Following the decision of this court in Jadavji Narsidas Co. v. Commissioner of Income Tax the Tribunal accepted this contention raised by Hirani Firm in part. The Tribunal, however, did not accept the assessee's contention that the loss of the assessee-firm in the Arvi contract amounted to ₹ 27,000. According to the Tribunal, the amount of the share of loss of the assessee firm in the Arvi contract had not been determined as such at ₹ 27,000. It therefore directed the Income Tax Officer to determine the quantum of loss and take the loss into account in determining the income of the assessee-firm. The material part of the order of the Tribunal is as follows : The assessee's claim before us is that he should be entitled to a set-off of the loss of ₹ 27,000 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment year 1958-59 ? (2) Whether, having regard to the order made on February 4, 1959, annexure 'D' in the case of M.H. Entity for the assessment year 1958-59, it was open to the Tribunal to direct the Income Tax Officer to determine the assessee's share of loss in the Arvi contract and allow it accordingly ? 8. Mr. Joshi, learned counsel for the revenue, in the first instance contends that the first question is not one arising out of the order of the Tribunal. In fact, none of the parties had raised such a contention, nor had the commissioner in his application under section 66(1) asked that such a question should be raised. Mr. Ashgarali, learned counsel for the assessee, also agrees that question No. 1 is not one arising out of the order of the Tribunal. It therefore need not be answered 9. As regards question No. 2, the argument of Mr. Joshi is that the Tribunal erred in holding that the M.H. Entity was not assessee in the assessment year 1958-59, and assuming that the facts of the present case were identical with those in Jadavji's case, the decision in that case would not govern this case. In the alternative, Mr. Joshi cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual, D, and the partners of the assessee-firm. At page 47, their Lordships in the majority judgment, observed : To begin with, the assessee-firm as a firm could not enter into a partnership with Damji. Damaji 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 has held by this court in Dulichand Laxminarayan v. Commissioner of Income Tax. There was thus a partnership between Damji and the four members of the assessee-firm acting for themselves and indeed the deed which has been produced in this case shows as much. In the affairs of the unregistered firm, the assessee-firm had no locus standi. 12. It is no these grounds that the appeal has been allowed. Mr. Ashgarali, learned counsel for the assessee, frankly concedes that, in view of the decision of the Supreme Court, the answer to the second question will have to be in favour of the Commissioner. 13. In the result, it is not necessary to answer the first question. Our answer to the second question is in the negative. 14. In the circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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