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

l s.c.R. SUPREME COURT REPORTS

609

of the assessee and in our opinion this was such a case.

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.

Appeals allowed.

1962

M. Chockalingam v. Commissioner of fncomt-tax, Madras

Hidayatullah, J.

THE COMMISSJONER OF INCOME-TAX, BOMBAY CITY II, BOMBAY

1962

October, 12.

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 not registered. The income-tax au~honU~s reJe~t.ed the clallll and the Appellate Tribunal a~reed with theu decmon on the grounds (1) that it being admitted that the ankdas were in the name of D there was no satisfactory evidence that the assessee did business' in the joint account, and (2) that, in any case, the asi:;essee could not claim the set-off as the loss was suffered by an unregistered firm.

610 SUPREME COURT REPORTS [1963] SUPP.

1962

Commissicm1r of lncorn,..lax, Bombay City 11, Bombay v. M/s. JadfJ1Jji Narsidaf & Cn.

On a reference, the High Court held ( 1) that there was no legal admissible evidence to justify the Tribunal's finding that the transactions in question were not those of the assessee, and (2) that the assessee firm could claim a set-off in respect of the share of loss in the unregistered firm "if the income-tax autho rities did not proceed to determine the losses of the unregistered firm and did not bring it to tax as permitted bys. 23 (5) (b)."

HeU, that the High Court erred in its view that the asses see firm could claim a set-off in respect of the loss incurred in the unregistered firm.

Helil, further (per Kapur and Hidayatullah,.JJ.) : (1) that if under s. 66 of the Indian Income-tax Act, J 922, a finding given by the Appellate Tribunal is to be considered final, it is necessary that the reasons for reaching it should be stated by the Tribunal with sufficient fullness to inform all concerned what they are.

(2) that there could not be a partnership between D and If there w~s a partnership it was between the regiscered firm. D and the four partners of the assessee firm in their individual capacity, and under the provisions of s. 24 of the Act the loss of Rs. 1,05,641 could not be set off against the profits of the registered firm.

Per Sarkar, J .-In view of the decision in Dulicharul, Laksh minarayan v. The Commissioner of Income-ta.1', Nagpur, [1956] S. C R. 154, that a firm as such is not entitled to enter into partnership with another firm or indiuiduals, the assessee firm could not in law enter into partnership with D, and the ques tions answered by the High Court did not really arise in the present case.

CIVIL APPELLATE JURISDICTION : Civil Appeal

No. 545 of 1961.

Appeal from the judgment and order dated October 23, 1958, of the Bombay High Court in Incorne-tax Reference No. 23 of 1958.

K. N. Rajagopal 8astri and R. N. Bachthey,

for the appellant.

Purw;hottam Trikamrlas, 8. N. Andley, &mesh

war Nath and P. L. Vohra, for the respondent.

1962

Commission1r of Imome~tax, Bombay Cily l l, Bombay v. /ll/ s. J ad""ji Na,siJas & Co.

Hidayalul/oh, /,

l S.C.R. SUPREME COURT REPORTS

611

1962. October 12. The following judgments were delivered. The judgment of Kapur and Hida yatullah, JJ., was delivered by Hidayatullah, J., Sarkar, J., delivered a separate judgment.

HIDAYATULLAH, J.- This is an appeal by the Commissioner of Income-tax, Bombay, against the judgment and order of the High Court of Bombay dated October 23, 1958, by which the High Court answered two questions referred to it under s. 66 (2) of the Income-tax Act in favour of the respondent Jadavji Narsidas & Co. The High Court certified this case as fit for appeal to the Supreme Court and hence this appeal.

The facts are simple. The year of account is the S. Y. 2001 corresponding to October 10, 1944, to November 4, 1945, and the assessment year is 1946- 4 7. The respondent is a firm consisting of four partners and was registered under section 26A of the Income-tax Act for the relevant year. The assessee firm carries on business which is mainly speculation. Iu the year of account it claimed inter alia a loss of Rs. 1,05,641 which it was said, arose in speculation in a venture of the assessee firm with one Damji Laxmidas. This venture was carried on in the name of Damji Laxmidas on behalf of an alleged firm in which Damji was said to have a share of -/6/- and the assessee firm the balance. A deed of partnership dated November 14, 1944, was also produced before the Income-tax Officer. The sum of Rs. 1,05,641 represented half the losses of the joint venture, the other half being claimed by Damji in his own indi vidual. assessment. The so·called firm of Damji Laxm1das and the assessce firm was an unregistered one. The Income-tax Officer, Bombay, ,disallowed these losses and added back this amount along with some others to convert a loss of Rs. 55,931 declared by the assessee firm into a profit of Rs. 1,88,575. THis profit was carried by him in accordance with the ahare of the partners into their individual assessment,

1962

Commissioner cf l/ncome-tax. Bombay City I.I, ~omba~ v. M/s.Jadavji N arsidas & Co.

Hidayatullah J.

612 SUPREME COURT REPORTS [1963) SUPP.

In the assessment of Damji, it may be stated here, the loss was not allowed on the ground that having arisen in an unregistered partnership, it could only be considered in the assessment of the unregis In rejecting the evidence of the tered partnership. loss of Rs. 1,05,641 in the assessment of the assessee firm the Income-tax Officer gave three reasons (i) that the ankdas were in the name of Damji Laxmidas and not in the name of the unregistered firm or the assessee firm, (ii) that the assessee firm claimed only -/8/- of the losses and not -/10/- according to its share and (iii) that the assessee firm which was a well-known firm doing extensive busmess was said, surprisingly enough, to have entered into a partnership with an insignificant person like Dam ji Laxmidas to carry on this vast business. He held that the assessce firm had purchased these losses from D amj i Laxmidas to be able to set them off against its profits to avoid tax. The Appellate Assistant Commissioner dismissed the appeal filed by the assessec firm and so also the Appellate Tribunal. The two members of the reasons. The Appellate Tribunal gave different Judicial Member (Mr. A. R. Aggarwal) observed :

the

that really

"So far as the last item No. (3) is concerned we are not satisfied loss of It is Rs. 1,05,641/- was the loss of the assessee. .admitted by the assessee that the ankdas are in the name of Damji Laxmidas. By no evi dence we are satisfied (sic) that really the asses see did business in the joint account. Conse quently, this claim of the asscssee is dis allowed."

The Accountant Member (Mr. P. C. Malhotra)

observed :

"I agree with my learned brother in the .order I would, however, hke to which he has passed. add a few words. It is not even the assessee's case that loss of Rs. 1,05,641/- was suffered by it.

1 S.C.R. SUPREME COURT REPORTS

613

According to the assessee it did some joint ven ture transactions with Damji Laxmidas. Damji Laxmidas came in appeal to the Tribunal in res pect of his share of the loss. It was held that the loss arising to a person in a joint venture cannot be allowed in his personal assessment as the loss is suffered by an unregistered partnership. It can only be carried forward in the account of the unregistered firm."

Comrnis.siomr of lnconu-tax, BomlPay City Tl, Bomb•J v. M/s. Jadavji NaesidaJ .& <!o.

Hida)atullak,. J.

The assessee firm applied to the Tribunal asking that a case be stated to the High Court but failed. The assessee firm then moved the High Court under section 66 (2) of the Income-tax Act and under the High Court's direction the Tribunal stated a case on the following questions :-

"(l) Whether there was any legal, admissible evidence to justify the Tribunal's finding that the transaction in question was not the transanctlon of the assessee.

(2) If not, whether the assessee can claim the set-off of such loss although it is the loss of an unregistered partnership."

The first question arises out of the observations of the Judicial Member and the second question from those of the Accountant Member. The High Court answered both the questions against the Department. It held that there was no legal, admissible evidence to justify the finding that the transactions in question were not those of the assessec firm and further that the assesscc firm could claim a set-off in respect of th~ share of loss in the unregistered firm "if the Income-tax Authorities do not proceed to determine ~he losses of the . unregistered firm and do not bring 1t to tax as permitted by s. 23( 5)(b ). "

On the first q nest ion the appellant argues that the High Court has decided the case as an Appea 1

1962

Commission11r of lncom,..tax, Bomba, City II, Bombay v. M/r. Jadavji Narsidas & Co.

Hida7atullalr, J.

614 SUPREME COURT REPORTS [1963] SUPP.

Court which it was not entitled to do. This is not a true representation of what the High Court did. Whenever the question propounded is whether there is any material on which a finding can be given the discussion savours of an appellate approach but it is not so. The High Court noticed that the Tribunal had picked up only one reason from the order of the Income-tax Officer and held that the a~sessee firm had "purchased losses" from Damji ,Laxmidas but said nothing about the other reasons which had influenced the Income-tax Officer. The High Court, however, examined all the reasons given by the Income-tax Officer and reached the conclusion that there was 'IW evidence to justify the finding which had been given in the case.

Before examining the evidence ourselves to see which conclusion is justified, we wish to make a few In a reference under s. 66, a general observations. finding given by the Tribunal is considered final and the High Court accepts it without examination of the material. The High Court does not hear an appeal but answers certain questions of law in the light of the facts proved. If a finding is final in this way, one does expect that the reasons for reaching it will at least be stated with sufficient fullness to inform all concerned what they were. Even if the reasons given by an inferior Tribunal are not restated, at least a general approval of them, or such of them as are In the present case, all acceptable, should appear. that is stated is :

"It is admitted by the assessee that the ankdas are in the name of Damji Laxmidas. By no evidence we are satisfied (sic) that really the assessee did business in the joint account."

This, by itself, is hardly a fair disposal of the ques tion whether the assessee firm did business in a joint account with one Damji Laxmidas. The solitary ground for rejecting the claim is too indefinite to

1962

Commissioner of Income-tax, Bomha.r City 11, Bombay v. M/s, Jadaoji Narsidas & Co.

Hidayalullah, J.

I S.C.R.

SUPREME COURT REPORTS

615

warrant this conclusion. It is contended that we should take into account also the reasons given by the Income-tax Officer which were before the Income-tax Tribunal and which have also been mentioned in the statement of the case. The High Court did so and we allowed those reasons to be brought before us. We would, however, have preferred if the order of the Tribunal in the appeal filed by the assessee firm had even briefly expressed their approval of those reasons and not left them to be mentioned in the statement of the case.

The question, then, is whether there was evidence to justify the Tribunal's finding that the transactions with Damji Laxmidas were not the transactions of the assessee firm. inquiry the Court In such an looks not to the sufficiency of the evidence but whether any evidence exists at all. Even if there be slight evidence which was believed by the Tribw. al and on which the conclusion can be rested, such question must be answered in the affirmative. But the finding must not proceed upon conjecture, suspicion or surmise. If there is not a scintilla of evidence, the finding cannot be sustained because the proved facts would not then support the inference.

In this connection, the Income-tax Officer gave three reasons. The most important of which being the ankdas were in the name of Damji. According !o the deed of partnership, which has been produced m the case, the four partners of the assessee firm and Darnji had entered into a partnership to do business together, specifying the shares of the partners of the assessee firm which shares inter se are in the same proportion as their interest in the asscssee firm. The new firm was not given a trade name. This is no doubt a~ unusual feature .. But if no name was given then busmess could be earned on only in the name or names of one or more partners. That Damji's name ~as chosen, and not any other, docs not lead to the If Damji's mference that business .was nut <lone.

1962

Commissiontr of lncomt-tax, Bomhay City II, Bombay v. M/J . .Jadavji Narsidas & Go.

Hidayalullah, J.

616 SUPREME COURT REPORTS [1963] SUPP.

name was used then it is reasonably clear that the ankdas would be in his name and that is how the matter stood.

The next reason is that the losses were claimed on the basis of half and half by the assessee firm and Damji, in their respective assessments contrary to the proportion of -/10/- and -/6/- as in the deed. What ever may be said of the losses claimed by Damji which were in excess of the agreed share the same cannot be said of the assessee firm which is claiming a share of losses which is less than the agreed rate. But sometimes additional responsibility is shouldered by a partner because of some action taken by him not meeting with the approval of the others. Often enough the shares are readjusted by agreement. There may be many reasons why the loss claimed by the assessee firm was less than what it could have really claimed but this hardly leads to the inference that no business was done. This circumstance also does not lead to the inference which has been drawn from it.

It

The third reason is that it is unlikely that the partners of a big firm like the assessee firm would enter into an agreement with a comparatively small man for doing such vast business. is pointed out that Damji had at no time paid Income-tax in excess of Rs, 1,300. The accounts of the new partnership have been exhibited in the case. They show a long course of business. The total business done was to the tune of Rs. 9 lacs odd. As speculative business is made up, almost always, of either loss orprofit we should also look to the extent of the profits made and not merely the losses. In this case, ·but for one or two transac tions which miscarried, Damji would have made a huge profit. It is possible that he was chosen as a part- . ner in view of his acumen in these matters rather than to finance the projects. This is not his to say that 'buying of losses' is not common or that men of straw are not taken on as partners to give up

l\ bili ty

1962

The Commissiontr of lncome·tax,B"mb• City II, Bombay v. Ms. JU®jiNarsidt &Co.

HiJa)'atullah, J.

1 S.C.R. SUPREME COURT REPORTS

617

their losses to equalise profits elsewhere. The fact remains, as pointed out by the High Court, that losses can only be bought if they have been incurred and in the present case there is a long course of business which at certain stages was profitable though ulti It is impossible to say in mately it showed a loss. this case that the assessee firm took over losses with out actually having done business in company with Damji. There is no foundation, whatever, for the inference that the losses were purchased by the asses see firm from Damji whether we take the reasons given by the Income-tax Officer individually or col lectively. We are of the opinion that the High Court did not exceed its powers in examining the evidence in support of the inference of the Income-tax Officer that no business was done in company with Damji but the assessee firm took over some of his losses. The answer of the High Court to the first question is therefore upheld.

This brings us to the second question and it is whether the assessee firm can set off the loss of Rs. 1,05,641 against its other profits from its other business? The High Court has held that it C!Ul do so. In our opinion, and we say it with great respect, the High Court was in error in reaching this conclusion.

To begin with the assessee firm as a firm could not enter into a partnership with Damji. · Damji could be admitted into the assessee firm or the mem bers of the assessee firm could enter into a partner ship with Damji in their individual capacity. The assessee firm however could not do so as a firm. This was held by this Court in Dulicharul 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 In the been produced in this case shows as much. affairs of the unregistered firm, the assessee firm had no loll'Ull standi. There were two distinct

thus

(I) [19561 29 l. T. I\, 515,

618 SUPREME COURT REPORTS [1963] SUPP.

1962

partnerships. One was the assessee firm which was · registered consisting of four partners and the second The Oommis•ioner ef lncome·tax,Bombay was an unregistered firm consisting of five partners of

City II, Bomha;y v. M/1. Jadavji Narsidas & Co.

Hi Jayatullh, .T.

whom the fifth was Damji.

The provisions which bear upon the question are many and need not be set out at length. The gist of the relevant sections will be stated by us in this judgment. Under s. 24( 1) an assessee sustaining a loss of profits in any year under any of the heads mentioned in s. 6 is entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year. From April J, 1953, loss sustained in speculative transactions can only be set off against profits arising in the same kind of business. In the present case, both the profits of the assessee firm and the loss in the transactions with Damji arose out of speculation and no difficulty arises. By assessee in the section is meant the person by whom tax is paid and in every instance it is neces· In this case the sary to find out who that assessee is. assessee is a registered firm of four partners and these partners did business resulting in profits as members of the assessee firm and also as mem hers of another unregistered firm which led to a loss.

Now the assessment of firms is done differently accordingly as they are registered or unregistered. Section 23 ( 5) states that when the assessee is a firm the total income of the firm must be assessed but if the firm is a registered firm the tax payable by the firm is not to be determined but the total income is to be carried to the assessment of the partners in accordance with their shares and the profits or losses, as the case may be, must be assessed as part of their other income. But when the assessee is an unregis tered firm, the assessment 'is of the firm itself unless the Income-tax Officer finds that by assessing the unregistered firm as a registered firm ~or:- tax is likely to result. The assessment otherwise 1~ of ~e unregistered firm and not of the partners m their

1962

17/, Commissimu1 of Income-ta>:,llimu J City II, Bomllay v. M/1. Jadauji }{arsidas & l'o.

I S.C.R.

SUPREME COURT REPORTS

619

private assessment. This is the gist of the rule con tained in the fifth sub-section of s. 23.

There are, however, other provisions which must also be noticed. The first provision to notice is s. 16 (1) (b) which says that when the assessee is a partner of a firm, then whether the firm has made a profit or loss, his share (whether a net profit or a net loss) is to be computed in the stated manner and if his share so computed is a loss, such loss may .be set off or carried forward and set off in accordance with the provisions of s. 24.

Section 24 then provides for the set off of the loss as well as the carrying forward of the loss. The second proviso deals with the question of set off in relation to both registered and unregistered firm. It says tnat when the assessee is an unregistered firm (not assessed as a registered firm) the loss can only be set off against the income, profits and gains of the firm and not those of partners, but if the assessee is a registered firm, the loss which cannot be set off again st the income, profits and gains of the firm shall be apportioned among the partners and they alone shall be entitled to have the amount of loss set off under the sectio~. Shortly stated, the losses incurred by an unregrstered firm can he set off only against its own profits while the net losses of a registered firm are apportioned among the shareholders and they alone are entitled to set them off .

. Then come the provisions with regard to the carrymg forn.·ar~ of ~he losses under section 24 (2). Here also there is a difference between registered and u?r~gis~ered firms. The difference co~tinues the distmction _made by_ the proviso to sub-s. (I) which we. have JUSt noticed. Proviso (c) deals with a registered firm and partners in unregistered firms in the same manner as the proviso to sub-s. (I) above analysed. It says that (a) a registered firm is not entitl ed to carry foiward and. set off any loss apportioned

1962

TM Commissioner ef lncU1114·111X,Bombay Giry 11, Bombay v. M/s. Jadavji .NOrsidas & Co.

Hidayatulloh, J.

620 SUPREME COURT REPORTS [1963] SUPP.

the partners and

between in un registered firms assessed as such are likewise not entitled to carry forward and set off against their own income losses sustained by the firm. An unregistered firm assessed as a registered firm comes under (a) above.

(b) partners

What then is the position here ? The unregis tered firm has not been assessed. The assessee firm alone has been assessed and on its own assessment it It seeks to set off against its has shown a profit. profits a loss of Rs. 1,05,641 which, it is said, was incurred by it in partnership with Damji. We have shown above that there can be no partnership between the assessee firm and Damji. There was however a partnership between Damji and the four partners of the assessee firm in their indfvidual capacity. Now under s. 24 ( 1) 2nd Proviso the losses of the unregis tered firm of Damji and these four partners can only be set off against the income, profits and gains of the unregistered firm and not those of its partners. The loss of Rs. 1,05,641 could be set off against the irn:ome, profits and gains (if any) of the unregistered firm of five persons and not of the partners. In the same manner the loss, if not absorbed, could be carried forward to be set off against further income, profits and gains of the same unregistered firm of five persons. The High Court was thus in error in hold ing that those losses could be set off against the income of the assessee firm. It makes no difference that the Department has not assessed the unregistered firm or taken action under s. 23 (5) {b). What the High Court has ordered just cannot be done as it is against the provisions of s. 24.

Whether the partners in their individual assess ments would he able to take advantage of s. 16 (1) (b) and the decision of the Privy Council in Aruna chalam, Ohettiar v. Income-tax Commissioner (1) (a point almost conceded before us), is not a matter .on which we need pronounce our opinion. That question does not arise for our consideration. The answer of

(I) (1936) t. R. 63 I. A, 231.

1 S.C.R. SUPREME COURT REPORTS

621

the High Court to the second question is set aside and the question is answered in the negative. Iµ view of the equal success parties will bear their own costs here and in the High Court.

SARKAR, J.-The respondent, a firm registered under the Income-tax Act, 19:!2, claimed in its assess ment to that tax for the year 1946-47, a set off for a sum of Rs. 1,05,641/- as its share of the loss of another partnership said to exist between it and one Damji Laxmidas and which, for convenience, I will call the bigger partnership. The Income-tax Officer refused to allow the set off on the ground that the existence of the bigger partnership had not been established.

1962

Thi CommissiOMr of lncome-tax,Bombt Ci{'y 1!, Bomb•1 v. M/s. JaJavji MmidaJ &Co.

Sarkar, J.

to

The respondent firm's appeals, first

the Appellate Commissioner and then to the Appellate Tribunal from the order of the Income- tax Officer failed. Thereafter pursuant to an order obtained by the respondent firm from the High Court of Bombay, two questions were referred by the Tribunal to that Court for decision. Both these questions were answered by thi: High Court against the Department and the Commissioner of Income-tax has thereupon filed the present appeal.

The first of these questions '.s, "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". No~ it has been held by this Court in Dulichand LakBhminarayan v. The Commissioner of lncomP,-klx, Nagpur(') that "a firm as such is not entitled to enter into partner ship with another firm or individuals". The respon dent firm, therefore, as a firm could not in law have entered into any partnership with Damji. It would hence be to no purpose to enquire whether there was ev~dence to_justify the finding that such a partnership ex!sted or m other words, to enquire whether the evidence showed that an agreement of partnership

(1) [1956] S. C. R. 154, 163.

U62

?ie Commissionlf' · Income-iai:,Bombay City II, Bomb.:y v. M/s. Jadavji Jlf arsidas & Co.

Sarkor, J,

622 SUPREME COURT REPORTS [1963]SUPP

which in law could not be made had in fact been made. That which the Jaw does not recognise does not for a court of law exist. I think therefore that the first question does not really arise and no answer to it need be given.

framed,

partnership." As

The second question which was referred to the High Court was, "If not, whether the assessee can claim the set off of such loss, although it is the loss of an unregistered this question is posed only if the first question is answered in the negative. As in my view the first question does not arise at all, I will consider this question independently of the first. The High Court's answer to this question was that the respondent firm can claim the set off and this answer was based on the assumption that a partnership between a firm and an individual is permissible, an assumption which must be held to be unwarranted in view of the decision in Dulichand's case.(1) It must be held that no partner ship in which the respondent firm as such is a partner, exists. If the partnership does not exist, the respon dent firm cannot have suffered any loss as a partner in it and there is therefore no loss for which it can claim a set off.

The sections of the Act dealing with set off would not justify a set off in such circumstances. Thus under s. 10 an assessee is entitled to set off the loss incurred by him in one business against the profits made by him in another business : see Anglo French Textile Co. Ltd. v. Commissioner of Income It is hardly necessary to point out that in tax (')- the case of a single business its profits can only be ascertained after its losses have been taken into account. If this also is to be called a set off, I suppose it may also be justified under s. 10. It is clear that the set off contemplated by this section is of a loss suffered by the assessee himself. That is not the position in the present case. The assessce, the respo~­ dent firm, has no interest in the bigger partnership

(I) [1956] s. C. R. 154, 163.

(2) (1953] S. C. R. 448,453.

1962

TM Commissioner of Incame-tnx,Bombay Citv II, Bomba~v v. Mis. Jadauji Narsiclas & Co.

Sarkar, /,

1 S.C.R. SUPREME COURT REPORTS

623

and, therefore, no concern with its losses. Sub-section (i) of s. 24 also provides for set off by an assessee of a loss suffered by him under one head of income against the profits earned by him umler another head. This section would not assist the respondent firm or the same reason as in the case of s. llJ and also be cause it applies when two heads of income are being considered while in the present case we have only one head of income, namely, business. The second proviso to sub-sec. (1) of s. 24 provides for certain rights of set off in the case of assessment of unregister ed and registered firms. That part of this proviso which deals with an unregistered firm car>not obvious ly apply to the present case which is one of the assessment of registered firIP. The other part of the proviso dealing with a registered firm would not assist the respondent firm either though it is a register ed firm, because the right of set off that it gives is only to the partners of a registered firm and not to the registered firm itself and in the present case we are not concerned with a claim of set off by any partners of the respondent firm. No other section of the Act dealing with set off has been brought to our notice.

The second question should thrrefore be answer this question ed in the negative. Strickly speaking, also does not arise. As the bigger partnership does n~t exist, n? question of its being registered or other wise can anse.

I will assume that to have been so.

Learned counsel for t:ic respondent firm how ever contended that the bigger partucrship was really between Damji and the partners of the respon dent firm. It may be that in such .a case . the indi~'iual partners of the r?spondent firm m their respective asses~ments ~ay claim a set off of their sl13res oJ' the loss of the bigger partnership but with s11ch assessrncnts of indivi .. du~l partnc.rs this case is not conc•::m:<l. The quc:stion he1 e is whether the respondent firm ca11 claim a set

624 SUPREME COURT REPORTS [1963) SUPP.

1962

Tht Commission" f Jncomt-tax,Bambay City II, Bombay v. M/s. Jndavji Narsidas & Co.

Sarkar, J,

off in its own assessment. I venture to say that it does not follow that because the partners of the respondent firm may in their individual assessments be able to claim the set off, the respondent firm itself can do so;, they are different assessecs each with a separate and independent right of set off. One cannot claim a set off basing such claim on the other's right to it.

But it was said that in the present case the real I am assessees were the partners of the respondent. entirely unable to accept that contention. Section 23( 5) of the Act contemplates a registered firm as an assessee though it did not have to pay any tax itself as the law stood prior to April 1, 1956. The whole proceedings in the present case have been conducted on the basis that the respondent firm was the assessee. The questions raised in this case were framed on that basis and we are not called upon by them to say whether the partners of the respondent firm had any right of set off. The assessees in the present case were not the partners of the respondent firm. If they were, we would have found the respective incomes of the individual partners from other sources being considered but this was not what had happened. It seems to me to be impossible to contend in the present case that the assessees were the partners of the res pondent firm.

I would allow the appeal with costs here and

below.

BY COURT :

In view of the opinion of the majority the answer of the High Court to the first question is upheld and the answer to the second question is set aside. The parties will bear their own costs here and in the High Court.