Commissioner of Income Tax vs Ved Parkash

Surinder Singh, J.—The prayer made in this petition u/s 256(2) of the I.T. Act, 1961, filed by the Commissioner of Income Tax, Patiala-II, Patiala, is for theissue of a direction to the Income Tax Appellate Tribunal, to refer the following question of law to this court, which is said to arise out of the order of the Tribunal:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in affirming the order of the Appellate Assistant Commissioner holding that the assessee was entitled to a set-off of atl the unabsorbed loss from the firm, M/s. Hargolal and Sons ?"

The facts have been lucidly mentioned in the petition and may be briefly recapitulated. The respondent-assessee is an HUF whose karta, Ved Parkash, was previously a partner in the firm, M/s. Hargolal and Sons, Ambala Cantt., holding one-fourth share in the said concern, which was engaged in the business of manufacture and sale of scientific goods. The share of the income of the said firm used to be assessed in the hands of the assessee-family. It is not disputed that Ved Parkash had ceased to be a partner of the said firm with effect from May 31, 1969. During the assessment for the year 1970-71 relating to that firm, the loss of the firm for the period ending May 31, 1969 (the date on which Ved Parkash ceased to be a partner) was determined at Rs. 40,472 and the share of the loss of Ved Parkash was, thus, allocated at Rs. 10,591. It transpires that after ceasing to be partner of the firm, M/s. Hargolal and Sons, the assessee-family carried on the same business under the name and style of M/s. Modern Equipment Company. Ved Parkash is the karta of the joint family. For the assessment year 1971-72, the assessee-family claimed a set-off of the loss of Rs. 10,591 relating to the firm M/s. Hargolal and Sons in which Ved Parkash was a partner. The claim was rejected by the ITO on the ground that Ved Parkash had ceased to be a partner of the earlier firm and hence could not claim the set-off. In appeal, the AAC reversed the order of the ITO and allowed the set-off claim. The department filed an appeal to the Tribunal which upheld the decision of the AAC. The application filed by the revenue before the Tribunal requesting it to draw up the statement of case and refer the proposed question of law to this court, was also rejected. The present petition has consequently been filed with the prayer for issue of the necessary direction to the Tribunal.

After hearing the learned counsel for the petitioner, we find that there is no ground made out for varying the decision of the Tribunal. Two basic facts which emerge in the case are that Ved Parkash had ceased to be a partner of the firm, M/s. Hargolal and Sons on May 31, 1969, and he had claimed a set-off only in respect of his one-fourth share of the loss incurred during the period when he was a partner in that firm. Even when Ved Parkash was a partner of the said firm, Ms share of income was assessed as that of his HUF. Subsequently, the same HUF continued to run the same business of manufacture and sale of scientific instruments under a different firm name, i. e., Modern Equipment Company. In such circumstances, the relief available u/s 72(1) of the I.T. Act, in regard to set off of the loss could certainly be claimed by him. The Tribunal was also quite correct in holding that the fact as to whether Ved Parkash had continued to carry on the business in the next assessment year, was a pure finding of fact and no question of law arose therein.

In these circumstances, the petition is decided against the revenue and in favour of the rerpondent-assessee. There shall be no order as to costs.