Commissioner of Income Tax vs Dr. (Mrs.) Kamlesh Madan (legal heir of R.N. Madan)

Devinder Gupta, J.—The Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh, has referred the following question of law to this court:

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal erred in law in allowing the set off of the loss allocated to the assessee''s spouse in the firm in which the assessee, and his spouse were partners, against the other income of the assessee u/s 64(1)(i) of the Income Tax Act, 1961 ?"

Late Dr. R.N. Madan and his wife Dr. (Mrs.) Kamlesh Madan were partners in the firm, Madan and Co. For the assessment year 1977-78 and for the subsequent year 1978-79, in this assessment, the share allocation to Dr. Kamlesh Madan including the unabsorbed depreciation came to a loss. During the assessment proceedings, it was claimed that this loss should be set off against the income of Dr. R. N. Madan in view of the provisions of Section 64(1)(i) of the Income Tax Act, 1961. Such a claim on behalf of the assessee was negatived by the Income Tax Officer. The assessee preferred an appeal before the Commissioner of Income Tax (Appeals) who held that the share of loss of Dr. Kamlesh Madan, wife of Dr. R. N. Madan, will have to be considered under the provisions of Section 64(1)(i) of the Income Tax Act in the hands of her husband and, therefore, the assessee was entitled to the relief. The Revenue felt aggrieved and preferred an appeal before the Tribunal. The Tribunal dismissed the appeal. A reference was sought at the behest of the Commissioner of Income Tax, Patiala, and this is how the question of law has been referred to this court.

During the pendency of the reference in this court, the question of law referred to this court has since been decided by the Supreme Court in CIT v. P. Doraiswamy Chetty : [1990]183ITR559(SC) , wherein it has been held that the assessee is entitled to carry forward in the subsequent years not only his/her share of loss but also the share of loss of his/her spouse in the firm in which the assessee and his/her spouse were partners.

In view of the judgment of the Supreme Court in P. Doraiswamy Chetty''s case : [1990]183ITR559(SC) , the question of law is, accordingly, answered in favour of the assessee and against the Revenue.

A copy of the judgment under the signature of the Registrar and under the seal of the court be forwarded to the Income Tax Appellate Tribunal.