Commissioner of Income Tax vs Radhadevi D. Daga and others

V.A. Mohta, J.—Since a common question is required to be answered in these two matters, they are being disposed of by a common judgment. The referred question, which is at the instance of the Revenue, reads thus :

"Whether, on the facts and in the circumstances of the case, in determining the income of the minor child of the assessee by way a share in the firm which is includible in the assessment of the assessee u/s 64(ii), such income of the minor child is to be reduced by carry forward and set off of the share of the minor child by way of loss in the firm for the preceding assessment year ?"

M/s R. B. Bansilal Abirchand is a firm duly constituted under a deed of partnership dated May 15, 1955. The partnership was not to be dissolved on the death of a partner but was to be carried on with the legal heirs of the deceased partner as partner in place of the deceased. In case the heirs were minors, they were to be deemed to have been admitted to the benefits of the partnership. There were many changes in the constitution of the firm. The partnership deed dated October 29, 1959, is relevant for the assessment year 1962-63 with which we are concerned. The heirs of the deceased partner, Hiralal Daga, consisted of his wife and four minor children and the heirs of another deceased partner, Dwarkadas Daga, consisted of his wife and three minor children. The shares of the minors in the firm which were at a loss in the earlier assessment year were carried forward and set off to reduce the share of the minors in the income of the firm in the later assessment year by the Income Tax Appellate Tribunal, considering the provisions of section 72 and section 64(ii) of the Act.

Having heard learned counsel for the parties, it seems to us that the point involved is no more res integral and is fully covered by the decision of the Supreme Court in the case of CIT v. J. H. Gotla , which has been followed by a Division Bench of this court (Kania, Acting C.J. and Bharucha J.) in the case of Commissioner of Income Tax Vs. Abhay L. Khatau, . This court observed (p. 651) :

"We find support for the view that we have taken in a judgment delivered by the Supreme Court on August 29, 1985 (in Civil Appeals Nos.1596 to 1598 of 1973 - CIT v. J. H. Gotla ). The question in that case was whether the income of the wife and minor children of the assessee from a partnership in which the wife was a partner and the minor children had been admitted to its benefits, which partnership was carried on with assets transferred by the assessee, could be set off against any loss brought forward by the assessee in respect of a business carried on by the assessee. It was held that the profit or loss from a business of the wife or minor child included in the total income of the assessee should be treated as the profit or loss from a business carried on by him for the purpose of carrying forward and setting off of his loss."

To conclude, the question is answered in the affirmative and in favour of the assessee. No order as to costs.