KARTIK CHANDRA GHOSH, Howrah V. A.C.I.T Cir - 48/Kol., Kolkata

ITA 1767/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75052 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 10-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 03-12-2012
• Court: TRIBUNAL
• Department Lawyers: SABOORUL HASAN USMANI
• Assessee Lawyers: R DHAR
• Keywords: Business income; Depreciation; Source of fund; Unabsorbed depreciation
• Section: 44AD; 143(3); 32; 147

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 1767/KOL/2012 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2007-08 KARTICK CHANDRA GHOSH VS. ASSISTANT COMMISSIONE R OF INCOME-TAX, (PAN:ADRPG8329G) CIRCLE-48, KOLKATA. (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 14.02.2014 DATE OF PRONOUNCEMENT: 19.02.2014 FOR THE APPELLANT: SHRI R.DHAR, ADVOCATE FOR THE RESPONDENT : SHRI SABOORUL HASAN USMANI, JCIT, SR. DR $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XXX, KOLKATA IN APPEAL NO. 121/CIT(A)-XXX/CIR-48/2010-11 DATED 22.08.2012. AS SESSMENT WAS FRAMED BY DCIT, CIRCLE-48, KOLKATA U/S. 143(3)/147 OF THE INCOME-TA X ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE HIS ORDER D ATED 16.09.2010. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AS UNDER: WHETHER THE ASSESSEE BEING PARTNER IN A PARTNERSHI P FIRM IS ENTITLED TO SET OFF THE LOSS OF FIRM QUA HIS SHARE (UNABSORBED DEPRECIATION) AGAINS T HIS OTHER BUSINESS INCOME (IN INDIVIDUAL CAPACITY) AS PER THE PROVISIONS OF SECTI ON 70(1) OF THE ACT FOR THE ABOVE ISSUE, ASSESSEE HAS RAISED FOLLOWING 4 GROUNDS: 1. FOR THAT LD CIT(A) SHOULD HAVE HELD THAT THE AS SESSEE WAS ENTITLED TO SET OFF HIS SHARE OF LOSS (INCLUDING UNABSORBED DEPRECIATION) IN THE FIRM M/S. SEVA COLD STORAGE AGAINST HIS OTHER BUSINESS INCOME AS PROVIDED IN SECTION 70(1) OF THE I.T. ACT,1961. 2. FOR THAT LD CIT(A) SHOULD HAVE ACCEPTED THE ASSE SSEES CONTENTION THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE HE HAD BEEN OVER ASSESSED U/S. 143(1) OF THE I.T. ACT,1961 AT TOTAL INCOME OF RS. 7,65,180/- AND THAT HIS CORRECT TOTAL INCOME SHOULD HAVE BEEN ASSESSED AT RS. 34,120/-. 3. FOR THAT LD CIT(A) ON THE FACTS CIRCUMSTANCES OF THE CASE SHOULD HAVE QUASHED THE ASSESSMENT ORDER PASSED U/S 143(3)/147 OF THE I.T. ACT,1961 DATE 16.09.2010. 4. FOR THAT LD CIT(A) WAS NOT JUSTIFIED WHEN HE HEL D THAT THERE IS NO PROVISION FOR SET OFF LOSS IN PARTNERSHIP FIRM FORM INCOME OF THE PARTNER , OVERLOOKING PROVISIONS OF SECTION 70(1) OF THE I.T. ACT, 1961 WHICH PROVIDES FOR SETT ING OFF LOSS OF ONE SOURCE AGAINST PROFIT IN ANOTHER SOURCE; THERE IS NO SUCH PROHIBITION. 2 ITA NO.1767/K/2012 KARTICK CH. GHOSH , AY:2007-08 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND HIS SOURCES OF INCOME ARE BUSINESS AND OTHER SOURCES. HE HAS BUSINESS INCOME FROM (I) SHARE INCOME FROM PARTNERSHIP FIRM (ASSESSEE) (A) SEVA COLD STORAGE, (B) EASTERN ENGINEERING CORPORATION AND ALSO RUNS A PROPRIETORY CONCERN AS A CONTRACTOR. THE ASSESSEE HAS OTHER SOURCES OF INCOME I.E. INTEREST FROM NSC AND INTEREST FROM BANK. DURING THE FINANCIAL Y EAR 2006-07 RELEVANT TO AY 2007-08, THE PARTNERSHIP FIRM M/S. EASTERN ENGINEERING CORPORATI ON EARNED PROFIT BUT THE ANOTHER PARTNERSHIP FIRM M/S. SEVA COLD STORAGE SUFFERED LOSSES. THE A SSESSEE IS PARTNER IN BOTH THE FIRMS. THE ASSESSEE CLAIMED HIS SHARE OF LOSS AT RS.16,47,243/ - AS PER DULY AUDITED ACCOUNTS. THE ASSESSEE ALSO EARNED PROFIT IN HIS PROPRIETORY CONCERN, AS A DIRECTOR, AMOUNTING TO RS.13,68,242/- AS COMPUTED U/S. 44AD OF THE ACT. THE ASSESSEE FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.7,65,180/- AFTER SETTING OFF HIS SHARE OF LOS S (UNABSORBED DEPRECIATION OF RS.9,16,271/-) IN THE FIRM M/S. SEVA COLD STORAGE. THIS RETURN WAS P ROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, THE AO REOPENED THE ASSESSMENT AS INC OME HAS ESCAPED TAXATION U/S. 147 R.W.S. 148 OF THE ACT. THE AO WHILE COMPLETING ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE ACT DISALLOWED THE CLAIM OF DEPRECIATION BY HOLDING THA T THE PARTNERSHIP FIRM IS A SEPARATE ENTITY AND THE ASSESSEE WHO IS A PARTNER CANNOT CLAIM DEPR ECIATION ON THE ASSET OF THE FIRM IN VIEW OF THE PROVISION OF SECTION 32 OF THE ACT, WHILE COMPU TING HIS INDIVIDUAL INCOME. ACCORDINGLY, THE AO DISALLOWED THE CLAIM OF UNABSORBED DEPRECIAT ION OF RS.9,16,271/- WHILE COMPUTING THE INCOME OF THE ASSESSEE. AGGRIEVED AGAINST THE ACTI ON OF AO, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO CONFIRMED THE ACTION OF AO VIDE PARA 2. 3 OF HIS APPELLATE ORDER AS UNDER: 2.3. THE SUBMISSIONS OF THE APPELLANT HAVE BEEN C ONSIDERED. IT IS HOWEVER SEEN THAT IN RESPECT OF THE RELEVANT ASSESSMENT YEAR IN APPEAL .E. ASSESSMENT YEAR 2007-08 THERE IS NO PROVISION FOR THE PARTNER TO CLAIM HIS LOSS FROM FI RM AND SET OFF AGAINST ANY OTHER INCOME IN HIS PROPORTIONATE NDIVIDUAL RETURN OF INCOME. I T MAY BE MENTIONED THAT SUBSEQUENT TO ASSESSMENT YEAR 1993-94, INCOME FROM PROFIT OF THE PARTNERSHIP FIRM IS EXEMPT TO TAX AND SIMILARLY THERE IS NO PROVISION FOR SET OFF OF LOSS IN PARTNERSHIP FIRM FROM THE INCOME OF THE PARTNER. THE CASE LAWS CITED BY THE APPELLANT HAVE BEEN CONSIDERED AND ARE FOUND TO BE NOT APPLICABLE IN ITS CASE. IN THE CASE OF CIT VS. RAVI CHANDRAN FIRSTLY THE ASSESSMENT ORDER INVOLVED WAS 1978-79 I.E. PRIOR TO 1993-94 WH EN THE NEW PROVISIONS RELATING TO AMENDMENT OF TAXATION OF PARTNERSHIP FIRM WERE INTR ODUCED AND THE INCOME FROM THE PARTNERSHIP FIRM WAS EXCLUDED FROM INCOME OF THE PA RTNER BY AMENDING SECTION 10(2)(A) W.E.F 01.04.1993. EVEN OTHERWISE, THIS CASE LAW CIT ED REFERS TO CARRY FORWARD LOSSES OF DEFUNCT FIRM WHICH HAD CLOSED DOWN. THEREFORE, THE CASE LAW EVEN OTHERWISE IS NOT APPLICABLE IN THE CASE OF THE APPELLANT AS HIS PART NERSHIP FIRM IS A GOING CONCERN. SIMILARLY, WITH RESPECT TO CIT VS. VIRMANI INDUTRIE S PVT. LTD. THE SAME IS IN RESPECT OF THE METHOD OF ALLOWING CARRY FORWARD OF DEPRECIATION IF THERE WAS A CHANGE IN BUSINESS OF THE APPELLANT AND THE COURT HEKLD THAT EVEN IF THERE WA S A CHANGE IN BUSINESS THE CARRY FORWARD DEPRECIITON CANNOT BE ALLOWED TO SET OFF. T HE FACTS IN THE APPELLANTS CASE ARE TOTALLY DIFFERENT AS DEPRECIATION IN THE PARTNERSHI P FIRM HAS BEEN SOUGHT TO BE SET OFF FROM THE INCOME OF THE PARTNER I.E. THE APPELLANT. THERE FORE, FROM THE ABOVE, IT IS ACCORDINGLY HELD THAT THE APELLANT IS NOT JUSTIFIED IN SETTING OFF PROPORTIONATE SHARE OF UNASBORBED DEPRECIATION OF HIS PARTNERSHIP FIRM FROM HIS INCOM E AND IT IS HELD THAT THE A.O. WAS JUSTIFIED IN DISALLOWING THE SAME AND ACCORDINGLY T HE ACTION OF THE A.O. IS CONFIRMED. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE US. 3 ITA NO.1767/K/2012 KARTICK CH. GHOSH , AY:2007-08 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. NOW QUESTION ARISES WHETHER THE ASSESSEE IN HIS IND IVIDUAL CAPACITY CAN CLAIM SET OFF OF FIRMS UNABSORBED DEPRECIATION. NORMALLY, THE ASSESSEE IN CURRING THE LOSS AND THE ONE CLAIMING SET OFF ARE THE SAME. HOWEVER, WHERE THE ASSESSEE IS A PAR TNER IN A FIRM, A MEMBER OF AN AOP OR BOI, HE MAY CLAIM THE SET OFF EXCEPT TO THE EXTENT RESTI CTED U/S. 75 TO 77 OF THE ACT. BUT THIS PROPOSITION OF LAW IS NO LONGER PREVAILING AFTER TH E AMENDMENT IN THE INCOME-TAX ACT BY VIRTUE OF WHICH THE PROVISIONS OF SECTIONS 182 AND 183 OF THE ACT HAVE BEEN OMITTED BY THE FINANCE ACT, 1992 W.E.F. 1993 I.E. FOR AND FROM AY 1993-94. THE EARLIER POSITION, PRIOR TO AMENDMENT, WAS THAT AFTER THE TAXABLE INCOME OF A REGISTERED F IRM HAD BEEN ASCERTAINED AND COMPUTED IN THE NORMAL MANNER THE PROCEDURE LAID DOWN IN SECTION 18 2 OF THE ACT IS FOLLOWED. THE INCOME-TAX PAYABLE BY THE FIRM ITSELF IS DETERMINED AND A DEMA ND WAS MADE FROM THE FIRM OF THE TAX DUE. THE SHARE OF THE FIRMS TAXABLE INCOME, APPORTIONED TO EACH PARTNER IN ACCORDANCE WITH THE PROVISIONS OF SECTION 67 OF THE ACT, WAS THEN TAKEN TO HIWS RESPECTIVE ASSESSMENT AS AN INDIVIDUAL. HIS SUCH SHARE OF FIRMS TAXABLE INCOM E WAS ADDED TO THE PARTNERS OTHER INCOME AND THE AMOUNT OF TAX TO BE LEVIED ON SUCH TOTAL IN COME WAS THEN ASSESSED AND DEMAND FOR TAX THEREON WAS MADE FROM HIM. IF, HOWEVER, THERE WAS LOSS IN THE REGISTERED FIRM, THE PARTNER WAS ENTITLED TO SET HIS ALLOCATED SHARE OFF AGAINST HIS OTHER INCOME OR TO GET IT CARRIED FORWARD AND SET OFF IN ACCORDANCE WITH THE PROVISIONS OF SECTION 75 OF THE ACT. THE PROVISIONS OF SECTIO0N 32(2) OF THE ACT PROVIDES THAT WHERE THE ASSESSEE IS A RE GISTERED FIRM OR AN UNREGISTERED FIRM ASSESSED AS A REGISTERED FIRM AND EFFECT OR FULL EFFECT CANN OT BE GIVEN TO THE DEPRECIATION ALLOWANCE ALLOWABLE OWING TO THERE BEING NO ASSESSABLE PROFIT S OR THERE BEING INSUFFICIENT ASSESSED PROFITS, THEN THE UNABSORBED DEPRECIATION SHALL BE ALLOCATED TO THE PARTNERS IN THE PROPORTION OF THEIR RESPECTIVE SHARES. IF THE PARTNERS HAVE GOT OTHER THAN THE SHARE INCOME FROM THAT FIRM, SUCH ALLOCATED DEPRECIATION SHALL BE SET OFF AGAINST THE IR RESPECTIVE INCOME OF THAT YEAR FROM ANY OTHER SOURCE. BUT WITH AMENDMENT IN PROVISIONS OF THE ACT AS REGARDS TO TAXATION OF FIRMS W.E.F. 01.04.1993 I.E. FOR AND FROM AY 1993-94 THE CONCEPT OF REGISTERED FIRM WAS ABANDONED AND IT IS THE SAME POSITION AS A MEMBER OF AOP OR B OI THAT OF THE PARTNER OF THE FIRM. THE PROFITS OF PARTNERSHIP FIRM ARE ITSELF TAXED THEREO N AND WHATEVER REMAINS WILL BE DISTRIBUTED AMONG PARTNERS TO THE EXTENT OF PROPORTION OF THEIR SHARES AS TAX FREE SHARE. SIMILAR VIEW WAS DISCUSSED BY HONBLE APEX COURT IN THE CASE OF ITO VS. CH. ATCHAIAH (1996) 218 ITR 239 (SC). 5. THE RELEVANT CASE LAW OF HONBLE SUPREME COURT I N THE CASE OF CH. ATCHAIAH (SUPRA) HAS LAID DOWN THE PROPOSITION AS UNDER: IN OUR OPINION, THE CONTENTION URGED BY DR. GAURI SHANKAR MERITS ACCEPTANCE. WE ARE OF THE OPINION THAT UNDER THE PRESENT ACT, THE INCO METAX OFFICER HAS NO OPTION LIKE THE ONE 4 ITA NO.1767/K/2012 KARTICK CH. GHOSH , AY:2007-08 HE HAD UNDER THE 1922 ACT. HE CAN, AND HE MUST, TAX THE RIGHT PERSON AND THE RIGHT PERSON ALONE. BY 'RIGHT PERSON', WE MEAN THE PERSON WHO IS LIABLE TO BE TAXED, ACCORDING TO LAW, WITH RESPECT TO A PARTICULAR INCOME. THE EX PRESSION 'WRONG PERSON' IS OBVIOUSLY USED AS THE OPPOSITE OF THE EXPRESSION 'RIGHT PERSO N'. MERELY BECAUSE A WRONG PERSON IS TAXED WITH RESPECT TO A PARTICULAR INCOME, THE ASSE SSING OFFICER IS NOT PRECLUDED FROM TAXING THE RIGHT PERSON WITH RESPECT TO THAT INCOME . THIS IS SO IRRESPECTIVE OF THE FACT WHICH COURSE IS MORE BENEFICIAL TO THE REVENUE. IN OUR OPINION, THE LANGUAGE OF THE RELEVANT PROVISIONS OF THE PRESENT ACT IS QUITE CLE AR AND UNAMBIGUOUS. SECTION 183 SHOWS THAT WHERE PARLIAMENT INTENDED TO PROVIDE AN OPTION , IT PROVIDED SO EXPRESSLY. WHERE A PERSON IS TAXED WRONGFULLY, HE IS NO DOUBT ENTITLED TO BE RELIEVED OF IT IN ACCORDANCE WITH LAW*, BUT THAT IS A DIFFERENT MATTER ALTOGETHER. TH E PERSON LAWFULLY LIABLE TO BE TAXED CAN CLAIM NO IMMUNITY BECAUSE THE ASSESSING OFFICER [IN COME-TAX OFFICER] HAS TAXED THE SAID INCOME IN THE HANDS OF ANOTHER PERSON CONTRARY TO L AW. WE MAY PROCEED TO ELABORATE. SECTION 3 OF THE INDIAN INCOME-TAX ACT, 1922, AS AM ENDED BY THE INDIAN INCOME-TAX (AMENDMENT) ACT, 1939, READ AS FOLLOWS: ' 3. CHARGE OF INCOME-TAX. _ WHERE ANY CENTRAL ACT ENACTS THAT INCOME-TAX SHALL BE CHARGED FOR ANY YEAR AT ANY RATE OR RATES TAX AT TH AT RATE OR THOSE RATES SHALL BE CHARGED FOR THAT YEAR IN ACCORDANCE WITH, AND SUBJ ECT TO THE PROVISIONS OF, THIS ACT IN RESPECT OF THE TOTAL INCOME OF THE PREVIOUS YEA R OF EVERY INDIVIDUAL, HINDU UNDIVIDED FAMILY, COMPANY AND LOCAL AUTHORITY, AND OF EVERY FIRM AND OTHER ASSOCIATION OF PERSONS OR THE PARTNERS OF THE FIRM OR THE MEMBERS OF THE ASSOCIATION INDIVIDUALLY.' (EMPHASIS** ADDED). THE EXPRESSION 'PERSON' WAS DEFINED IN CLAUSE (9) O F SECTION 2 IN THE FOLLOWING WORDS: '(9) 'PERSON' INCLUDES A HINDU UNDIVIDED FAMILY A ND A LOCAL AUTHORITY'. AS AGAINST THE ABOVE PROVISIONS, SECTION 4 OF THE P RESENT ACT (BEFORE IT WAS AMENDED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, WITH EFF ECT FROM APRIL 1, 1989) READ THUS: '4. (1) WHERE ANY CENTRAL ACT ENACTS THAT INCOME-TA X SHALL BE CHARGED FOR ANY ASSESSMENT YEAR AT ANY RATE OR RATES, INCOME-TA X 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 INC OME OF THE PREVIOUS YEAR OR PREVIOUS YEARS, AS THE CASE MAY BE, OF EVERY PERSON : PROVIDED THAT WHERE BY VIRTUE OF ANY PROVISION OF T HIS ACT INCOME-TAX IS TO BE CHARGED IN RESPECT OF THE INCOME OF A PERIOD OTHER THAN THE PREVIOUS YEAR, INCOME-TAX SHALL BE CHARGED ACCORDINGLY. (2) IN RESPECT OF INCOME CHARGEABLE UNDER SUB-SECTI ON (1), INCOMETAX SHALL BE DEDUCTED AT THE SOURCE OR PAID IN ADVANCE, WHERE IT IS SO DEDUCTIBLE OR PAYABLE UNDER ANY PROVISION OF THIS ACT. '' (THE AMENDMENTS MADE BY THE AFORESAID AMENDMENT ACT OF 1987 DO NOT MAKE ANY DIFFERENCE SO FAR AS THE PRESENT CONTROVER SY IS CONCERNED). THE EXPRESSION 'PERSON' IS DEFINED IN CLAUSE (31) OF SE CTION 2 IN THE FOLLOWING WORDS: ' ' PERSON ' INCLUDES _ (I) AN INDIVIDUAL, (II) A HINDU UNDIVIDED FAMILY, (III) A COMPANY, (IV) A FIRM, (V) AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDU ALS, WHETHER INCORPORATED OR NOT, 5 ITA NO.1767/K/2012 KARTICK CH. GHOSH , AY:2007-08 (VI) A LOCAL AUTHORITY, AND (VII) EVERY ARTIFICIAL JURIDICAL PERSON, NOT FALLIN G WITHIN ANY OF THE PRECEDING SUB-CLAUSES. '' A COMPARISON OF THE PROVISIONS OF BOTH THE ENACTMEN TS IMMEDIATELY BRINGS OUT THE DIFFERENCE BETWEEN THEM. SECTION 3 OF THE 1922 ACT PROVIDED THAT IN RESPECT OF THE TOTAL INCOME OF A FIRM OR AN ASSOCIATION OF PERSONS, THE INCOME-TAX SHALL BE CHARGED EITHER ON THE FIRM OR THE ASSOCIATION OF PERSONS OR ON THE P ARTNERS OF THE FIRM OR ON THE MEMBERS OF THE ASSOCIATION OF PERSONS INDIVIDUALLY. IT IS EVID ENT 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 FOL LOW IT. IN SUCH A SITUATION, IT WAS GENERALLY HELD THAT ONCE THE INCOME-TAX OFFICER OPT ED FOR ONE COURSE, THE OTHER COURSE WAS BARRED TO HIM. BUT NO SUCH OPTION IS PROVIDED T O 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 DEFINE D 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 WHE THER INCORPORATED OR NOT. THERE ARE NO WORDS IN THE PRESENT ACT WHICH EMPOWER THE INCOM E-TAX OFFICER OR GIVE HIM AN OPTION TO TAX EITHER THE ASSOCIATION OF PERSONS OR ITS MEM BERS 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 TAX ED; THE MEMBERS OF THE ASSOCIATION OF PERSONS CANNOT BE TAXED INDIVIDUALLY IN RESPECT OF THE INCOME OF THE ASSOCIATION OF PERSONS. CONSIDERATION OF THE INTERESTS OF THE REVE NUE HAS NO PLACE IN THIS SCHEME. WHEN SECTION 4(1) OF THE PRESENT ACT SPEAKS OF LEVY OF INCOME-TAX ON THE TOTAL INCOME OF EVERY PERSON, IT NECESSARILY MEANS THE PERSON WHO IS LIAB LE TO PAY INCOMETAX IN RESPECT OF THAT TOTAL INCOME ACCORDING TO LAW. THE TAX HAS TO BE LE VIED ON THAT PERSON, WHETHER AN INDIVIDUAL, HINDU UNDIVIDED FAMILY, COMPANY, FIRM, ASSOCIATION OF PERSONS/BODY OF INDIVIDUALS, A LOCAL AUTHORITY OR AN ARTIFICIAL JUR IDICAL PERSON. FROM THIS, IT FOLLOWS THAT IF INCOME OF A IS TAXED IN THE HANDS OF B, A MAY BE LE GITIMATELY AGGRIEVED BUT THAT DOES NOT MEAN THAT B IS EXONERATED OF HIS LIABILITY ON THAT ACCOUNT. B CANNOT SAY, WHEN HE IS SOUGHT TO BE TAXED IN RESPECT OF THE TOTAL INCOME W HICH IS LAWFULLY TAXABLE IN HIS HANDS, THAT SINCE THE INCOME-TAX OFFICER HAS TAXED THE VER Y SAME INCOME IN THE HANDS OF A, HE HIMSELF CANNOT BE TAXED WITH RESPECT TO THE SAID TO TAL INCOME. THIS IS NOT ONLY LOGICAL, BUT IS CONSISTENT WITH THE PROVISIONS OF THE ACT. IN TH IS CONNECTION, IT MAY BE POINTED OUT THAT WHERE PARLIAMENT WANTED TO PROVIDE AN OPTION, A DIS CRETION, TO THE INCOME-TAX OFFICER, IT HAS PROVIDED SO EXPRESSLY. SECTION 183 [WHICH HAS S INCE BEEN OMITTED WITH EFFECT FROM APRIL 1, 1993, BY THE FINANCE ACT, 1992] PROVIDED T HAT IN THE CASE OF AN UNREGISTERED FIRM, IT IS OPEN TO THE INCOME-TAX OFFICER TO TREAT IT, AND MAKE AN ASSESSMENT ON IT, AS IF IT WERE A REGISTERED FIRM, IF SUCH A COURSE WAS MORE B ENEFICIAL TO THE REVENUE_IN THE SENSE THAT SUCH A COURSE WOULD FETCH MORE TAX TO THE PUB LIC EXCHEQUER. SECTION 183 READ AS FOLLOWS: ' 183. ASSESSMENT OF UNREGISTERED FIRM. _ IN THE CA SE OF AN UNREGISTERED FIRM, THE ASSESSING OFFICER _ (A) MAY DETERMINE THE TAX PAYABLE BY THE FIRM ITSEL F ON THE BASIS OF THE TOTAL INCOME OF THE FIRM, OR (B) IF, IN HIS OPINION, THE AGGREGATE AMOUNT OF THE TAX PAYABLE BY THE FIRM, IF IT WERE ASSESSED AS A REGISTERED FIRM AND THE TAX P AYABLE BY THE PARTNERS INDIVIDUALLY IF THE FIRM WERE SO ASSESSED WOULD BE GREATER THAN THE AGGREGATE AMOUNT OF THE TAX PAYABLE BY THE FIRM UND ER CLAUSE (A) AND THE TAX WHICH WOULD BE PAYABLE BY THE PARTNERS INDIVIDUALLY , MAY PROCEED TO MAKE THE ASSESSMENT UNDER SUB-SECTION (1) OF SECTION 182 AS IF THE FIRM WERE A REGISTERED FIRM ; AND, WHERE THE PROCEDURE SPECIFIE D IN THIS CLAUSE IS APPLIED 6 ITA NO.1767/K/2012 KARTICK CH. GHOSH , AY:2007-08 TO ANY UNREGISTERED FIRM, THE PROVISIONS OF SUBSECT IONS (2), (3) AND (4) OF SECTION 182 SHALL APPLY THERETO AS THEY APPLY IN R ELATION TO A REGISTERED FIRM.' IT MAY BE MENTIONED THAT SECTION 183 CORRESPONDED T O SECTION 23(5)(B) OF THE 1922 ACT. THE 1922 ACT NOT ONLY PROVIDED AN OPTION TO THE INC OMETAX OFFICER IN THE MATTER OF FIRMS AND ASSOCIATIONS OF PERSONS UNDER SECTION 3, BUT A LSO EXPRESSLY ENABLED HIM TO ASSESS AN UNREGISTERED FIRM AS A REGISTERED FIRM [SECTION 23 (5)(B)], IF BY DOING SO, MORE TAX ACCRUED TO THE STATE. THE 1961 ACT HAS OMITTED THE FIRST OPTION, WHILE RETAINING THE SECOND. IN THIS CONNECTION, IT WOULD BE RELEVANT TO NOTICE THE RELEVANT PROVISIONS OF THE DRAFT BILL PROPOSED BY THE LAW COMMISSION IN ITS XIITH REPORT , WHICH CONSTITUTES THE BASIS FOR THE 1961 ACT. CLAUSE (27) OF SECTION 2 OF THE DRAFT (DE FINITION OF 'PERSON') DID EXPRESSLY PROVIDE AN OPTION SIMILAR TO THE ONE CONTAINED IN S ECTION 3 OF THE 1922 ACT. CLAUSE (27) READ THUS: '(27) 'PERSON' INCLUDES _ (I) AN INDIVIDUAL, (II) A HINDU UNDIVIDED FAMILY, (III) A COMPANY, (IV) A FIRM OR OTHER ASSOCIATION OF PERSONS, WHETHE R INCORPORATED OR NOT, OR THE PARTNERS OF THE FIRM OR THE MEMBERS OF THE ASSOCIAT ION INDIVIDUALLY, (V) A BODY OF INDIVIDUALS, WHETHER INCORPORATED OR NOT, (VI) A LOCAL AUTHORITY, AND (VII) EVERY ARTIFICIAL JURIDICAL PERSON, NOT FALLIN G WITHIN SUBCLAUSES (I) TO (VI).'' (EMPHASIS* ADDED). IN THE 'NOTES ON CLAUSES' APPENDED TO THE DRAFT, TH E COMMISSION STATED: '27. PERSON. _ THE DEFINITION OF 'PERSON' IN EXISTI NG SECTION 2(9) HAS BEEN AMPLIFIED. THE EXISTING DEFINITION INCLUDES (A) A HINDU UNDIVI DED FAMILY, AND (B) A LOCAL AUTHORITY. THE GENERAL CLAUSES ACT, DEFINES 'PERSON ' AS INCLUDING A COMPANY OR ASSOCIATION OR BODY OF INDIVIDUALS WHETHER INCORPOR ATED OR NOT. THE CHARGING SECTION (SECTION 3) OF THE INCOME-TAX ACT ENUMERATE S THE UNITS FOR TAXATION AS 'INDIVIDUAL, HINDU UNDIVIDED FAMILY, COMPANY, LOCAL AUTHORITY, FIRM AND OTHER ASSOCIATION OF PERSONS, OR THE PARTNERS OF A FIRM O R THE MEMBERS OF THE ASSOCIATION INDIVIDUALLY'. SECTION 4 OF THE ACT REF ERS TO A 'PERSON'. IT SEEMS DESIRABLE TO HAVE A COMPREHENSIVE DEFINITI ON OF THE WORD 'PERSON' IN THE ACT SO AS TO COVER ALL ENTITIES MENTIONED IN _ (I) THE EXISTING DEFINITION [SECTION 2(9)], (II) THE EXISTING CHARGING PROVISIONS [SECTIONS 3 A ND 4], AND (III) THE GENERAL CLAUSES ACT. THE DEFINITION HAS, THEREFORE, BEEN AMPLIFIED ON TH E ABOVE LINES. '' PARLIAMENT, HOWEVER, CHOSE NOT TO ACCEPT THE SUGGES TED DEFINITION IN TOTO; IT DELETED THE WORDS INDICATING THE OPTION. THE COMMITTEE, WHICH DRAFTED THE DRAFT BILL COMPRISED SRI P. SATYANARAYANA RAO, SRI G. N. JOSHI AND SRI N. A . PALKHIVALA, WHO WAS SPECIFICALLY APPOINTED AS A MEMBER FOR THE PURPOSE OF REVISION OF THE INCOME-TAX ACT. [EXTRACTS ARE TAKEN FROM THE XIITH REPORT OF THE LAW COMMISSION O F INDIA, PUBLISHED BY THE GOVERNMENT OF INDIA, MINISTRY OF LAW]. 7 ITA NO.1767/K/2012 KARTICK CH. GHOSH , AY:2007-08 THIS QUESTION HAS ALSO BEEN TROUBLING THE HIGH COUR TS IN THE COUNTRY. AS A MATTER OF FACT, THE PATNA AND ANDHRA PRADESH HIGH COURTS HAVE TAKEN DIFFERENT VIEWS. BE THAT AS IT MAY, WE MAY MENTION THAT THE PATNA HIGH COURT IN MAHENDR A KUMAR AGRAWALLA V. ITO [1976] 103 ITR 688, THE PUNJAB AND HARYANA HIGH COU RT IN RODAMAL LALCHAND V. CIT [1977] 109 ITR 7, THE ANDHRA PRADESH HIGH COURT IN CHOUDRY'S CASE [1986] 158 ITR 224 AND THE DELHI HIGH COURT IN PUNJAB CLOTH STORES V. CIT [1980] 121 ITR 604 HAVE TAKEN THE VIEW WHICH WE HAVE TAKEN. ON THE OTHER HA ND, THE MADRAS HIGH COURT IN CIT V. BLUE MOUNTAIN ENGINEERING CORPORATION [1978] 112 IT R 839 AND THE PATNA HIGH COURT IN ITS EARLIER DECISION IN CIT V. PURE NICHITPUR CO LLIERY CO. [1975] 101 ITR 79 HAVE TAKEN THE OPPOSITE VIEW. THE ANDHRA PRADESH HIGH C OURT FIRST EXPRESSED THE OTHER VIEW, THEN IN CHOUDRY'S CASE [1986] 158 ITR 224 (AP), IT TOOK THE VIEW WHICH WE HAVE TAKEN AND THEN AGAIN IN B. R. CONSTRUCTIONS' CASE [1993] 202 ITR 222 (AP) [FB], IT HAS GONE BACK TO THE OTHER VIEW AND REITERATED THE VIEW TAKE N IN THE JUDGMENT UNDER APPEAL. IN RAMANLAL MADANLAL V. CIT [1979] 116 ITR 657, SABYAS ACHI MUKHARJI J., SPEAKING FOR A BENCH OF THE CALCUTTA HIGH COURT, RECOGNISED THE DI STINCTION IN THE LANGUAGE EMPLOYED IN SECTION 3 OF THE 1922 ACT AND SECTION 4 OF THE PRE SENT ACT, BUT THAT WAS A CASE OF AN UNREGISTERED FIRM WHERE THE INCOME-TAX OFFICER HAD ASSESSED THE INCOMES IN THE HANDS OF THE PARTNERS INDIVIDUALLY. IN SUCH A SITUATION, THE LEARNED JUDGE HELD THE INCOME-TAX OFFICER CANNOT, AT THE SAME TIME, BRING THE UNREGIS TERED FIRM TO TAX IN RESPECT OF THE VERY SAME INCOME. SECTION 183 WAS ALSO REFERRED TO IN T HAT CONNECTION. 6. SIMILARLY, UNDER THE UNAMENDED PROVISIONS OF SEC TIONS 182 AND 183 OF THE ACT THE UNABSORBED DEPRECIATION U/S. 32(2) OF THE ACT OF AN UNREGISTERED FIRM IS CARRIED FORWARD FOR SET OFF AGAINST NEXT YEARS TOTAL INCOME OF THE UNREGIS TERED FIRM ITSELF. ALTHOUGH, IN CASE OF UNREGISTERED FIRMS, THERE IS ALLOCATION OF THE FIRM S PROFITS AMONGST THE PARTNERS, IT IS NOT U/S. 158 OF THE ACT, WHICH SECTION IS APPLICABLE ONLY TO REGISTERED FIRMS OR UNREGISTERED FIRMS ASSESSED AS REGISTERED FIRMS. THE ALLOCATION, IN C ASE OF UNREGISTERED FIRMS ASSESSEES, IS ONLY FOR RATE PURPOSES AS PROVIDED IN SECTION 86(III) OF THE ACT. THE UNABSORBED DEPRECIATION AS WELL AS LOSS IS CARRIED FORWARD TO BE SET OFF ONLY AGAINST THE FIRMS INCOME AND NOT THAT OF PARTNERS. NOW EXACTLY, SIMILAR IS THE POSITION OF THE FIRMS A S ASSESSED U/S. 184 AND 185 OF THE ACT W.E.F. 01.04.1993 BECAUSE THE PROFIT OF THE FIRM IS TAXED IN THE HANDS OF THE FIRM AND SHARE OF THE PARTNER IS NEVER TAXABLE IN THEIR INDIVIDUAL ASSESS MENT. HENCE, WE ARE OF THE CONSIDERED VIEW THAT ASSESSEE IS NOT ELIGIBLE TO CLAIM UNABSORBED D EPRECIATION OF THE FIRM AGAINST INCOMES OF THE ASSESSEE WHO IS PARTNER OF THE FIRM AND ASSESSED IN INDIVIDUAL CAPACITY. WE CONFIRM THE ORDERS OF THE LOWER AUTHORITIES AND APPEAL OF ASSESSEE IS DISMISSED. 7. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED. 8. ORDER IS PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY, 2014 SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19TH FEBRUARY, 2014 12 '3' 4 JD.(SR.P.S.) 8 ITA NO.1767/K/2012 KARTICK CH. GHOSH , AY:2007-08 $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT SHRI KARTICK CHANDRA GHOSH, 16, PADMA G HOSH GARDEN LANE, LILUAH, HOWRAH-711 204 2 ./,- / RESPONDENT ACIT, CIR-48, KOLKATA. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .