THE COMMISSJONER OF INCOME-TAX, BOMBAY CITY II, BOMBAY vs. M/S. JADAVJI NARSIDAS & CO.

CIVIL APPEAL No. 545/1961Supreme Court1962 INSC 29112 October 1962Bench: 3 JudgesAuthor: J.L. KAPUR, A.K. SARKAR, M. HIDAYATULLAH16 pages
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What were the facts?

The assessee, M/s. Jadavji Narsidas & Co., a registered firm for assessment year 1946-47, claimed a set-off of Rs. 1,05,641, representing its share of loss from transactions conducted in the name of Damji Laxmidas. This venture was alleged to be a partnership between the assessee firm and Damji Laxmidas, which was unregistered. The Income-tax Officer rejected the claim, treating the venture as not belonging to the assessee and the loss as incurred by an unregistered firm. The Appellate Assistant Commissioner and the Appellate Tribunal upheld this decision. The High Court, on reference, answered two questions in favour of the assessee, leading to an appeal by the Commissioner of Income-tax to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that the High Court erred in its view that the assessee firm could claim a set-off in respect of the loss incurred in the unregistered firm. The Court reasoned that a firm as such cannot enter into a partnership with another firm or individuals. Therefore, there could not be a partnership between Damji Laxmidas and the registered assessee firm. If a partnership existed, it was between Damji Laxmidas and the four individual partners of the assessee firm in their individual capacities. Under Section 24 of the Act, the loss of Rs. 1,05,641 could not be set off against the profits of the registered firm. The Court also noted that for a finding of the Appellate Tribunal to be considered final under Section 66, the reasons for reaching it must be stated with sufficient fullness. The appeal was allowed, and the High Court's answer to the second question was set aside.

What were the issues?

1. Whether there was any legal, admissible evidence to justify the Tribunal's finding that the transaction in question was not the transaction of the assessee (turning on Section 66(2) of the Indian Income-tax Act, 1922)? - Assessee's contention: The High Court held there was no legal admissible evidence to justify the Tribunal's finding. - Revenue's contention: The Tribunal found insufficient evidence that the assessee conducted business in the joint account. 2. If not, whether the assessee can claim the set-off of such loss, although it is the loss of an unregistered partnership (turning on Section 24 of the Indian Income-tax Act, 1922)? - Assessee's contention: The High Court held the assessee firm could claim a set-off if the income-tax authorities did not proceed to determine the losses of the unregistered firm and bring it to tax as permitted by Section 23(5)(b). - Revenue's contention: The loss was suffered by an unregistered firm, and therefore, the assessee could not claim set-off.

Which sections of the Income-tax Act were involved?

Section 24,Section 66(2),Section 23(5)(b)

AI-generated summary — verify with the full judgment below

l s.c.R. SUPREME COURT REPORTS 609 of the assessee and in our opinion this was such a case. 1962 M. Chockalingam v.

In the result the appeals, are allowed. A writ of Certiorari will issue and the order of the Income- tax Officer will be quashed. The Income-tax Officer will, however, be free to take such action as may be open to him. In the circumstances of the case, the parties will bear their costs here and in the High Court. Commissioner of fncomt-tax, Madras Appeals allowed. THE COMMISSJONER OF INCOME-TAX, BOMBAY CITY II, BOMBAY v. M/s. JADAVJI NARSIDAS & CO. (J. L. KAPUR, A. K. SARKAR and M. HIDAYATULLAR, JJ.) Income Tax-Set-off-Profits of regi•tered firm and· loss incurred in unregistered firm-Findings of Tribunal-When binding on High Court-Indian Income-tax Act, 1922 (11 of 1922), SS, 24, 66 (2). The respondent, a fir:n consisting of fonr partners, was registered under the Indian Income-lax Act, I 922. For the assessment year 1946-4 7 it claimr.d to set off a sum of Rs. 1,05,641, as its share of the loss in respect of certain transactions said t? have beei: carried on i~ the name of D by another partnership be'.".'een '.t and D, wh1~h was no

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