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1998 DIGILAW 604 (MAD)

Commissioner of Income Tax v. J. K. S. Manickam

1998-04-16

N.V.BALASUBRAMANIAN, R.JAYASIMHA BABU

body1998
Judgment :- N.V. BALASUBRAMANIAN, J. At the instance of the Revenue, the Appellate Tribunal has stated the case and referred the following substantial question of law for our consideration in relation to the assessment year 1980-81, "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee is entitled to share the loss in the firm in which the assessee's father is a partner and in respect of which the assessee has overriding title ?" The assessee claimed during the course of the assessment proceedings in the assessment year 1980-81 as a result of partial partition, 1/3rd share of the income of his father from the firms belonged to him by overriding title. The Income-tax Officer however, rejected the claim on the ground that the losses belonged to his father. The Commissioner of Income-tax (Appeals) as well as the Appellate Tribunal held that the losses belonged to the assessee and the assessee is entitled to set off the losses against his individual income. The Appellate Tribunal followed its earlier order in the case of ITA No. 2265 (Mds.) of 1983, dated May 22, 1985, and held that the assessee was entitled to set off the losses. In another case, viz., J. K. K. Angappa Chettiar, who belongs to the same group of the assessee, this court in the case of CWT v. J. K. K. Angappa Chettiar, held that as a result of the partial partition effected between the assessee and his minor sons, there was a diversion of the profit from the firm and the profit attributing to the interest of the minor sons cannot be treated as wealth of the assessee as a result of the partial partition. That case arose under the Wealth-tax Act and the same principle laid down by this court would equally apply to the share of the losses also. Following the said decision, we find no error in the order of the Appellate Tribunal in holding that the assessee is entitled to the share of the loss in the firm, even though the assessee's father is a partnerTherefore, the question referred to us is answered in the affirmative, against the Revenue and in favour of the assessee. However, in the circumstances of the case, there will be no order as to costs.