LexSMT. SAROJ AGGARWAL versus COMMISSIONER OF INCOME TAX,U.P.
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209 SMT. SAROJ AGGARWAL v. COMMISSIONER OF INCOME TAX, u.p. SEPTEMllER 30, 1985 [V .D. TULZAPURKAR AND SAl!YASACHl MUKHARJI, JJ.] Income Tax Act 1961 Sections 72, 73, 74 and 78. Speculation rosiness - Loss - Set off of plilrtner' s share - Death of partner - Widow joining as partner in new partnership - A B Set off of loss of deceased partner against profits earned by C widow - Whether permissible. Interpretation of Deeds & Statutes Partnership firm - Partner - Death of - Succession - Whether could be inferred - Whether succession could be by D inheritance - Facts , being viewed in natural perspective and social milieu of country - Necessity for - Indicated. The appellant is the assessee. Her husband was a partner in three partnership firms. A partnership deed dated 30th July 1957 was executed by him alongwith two other partners. He died on 24th E July 1959 leaving behind the appellant. After his death another deed of partnership dated 12th August 1959 was executed by the assessee with the wife of the second partner in the first deed and also the first partner. This deed indicated the shares of the parties in the partnership firm and alao recorded the death of the assessee's husband and that he had died leaving the assessee as his widow who had adopted the son of the second partner in the F original partnership firm three days after his death. The asses see'~ bus band while he was a partner had an unabsorbed loss from the speculation business suffered by him as a partner in two firms as per the orders of the Income Tax Officer under Section 35 of the Income Tax Act 1922 for the G assessment years 1958-59, 1959-60 and l96Q-6l. In the assessment year 1962-63 the appellant (assessee) was entitled to a share in the speculation profits made by the firms, and claimed that the speculation loss suffered by her· husband in the earlier years should be set ofx against her speculation profits of the assessment year under appeal. Ii A B c D E F G H 210 SUPREME COURT REPORTS [1985] SUPP.3 s.c.R. The Income Tax Officer did not accept this contention and his order was confirmed in appeal by the Appellate Assistant Coomissioner who held that there could be no succession or inheritance in respect of membership of a firm, and that on the death of a husband or a father the wife or the son might be admitted into the partnership by the remainiug partners not because they had inherited the right to join the firm but because the remainiug partners were agreeable to their joining the firm and that on such death the wife or the son might inherit the capital left by the deceased in the firm and the wife or the son might have a right to take away such capital or to allow the same to remain with the firm, but that they would not have the right of inheritance to join the partnership on the basis of that capital and held that the assessee was therefore, not entitled to claim set off of the speculation losses sufferd by her husband. From the decision of the Appellant Assistant Coumdssioner both the assessee and the revenue went up in appeal before the Tribunal, and the Tribunal held that readiug the partnership deed it was clear th.it the assessee and the minor adopted son were admitted to the various partnerships after the death of the assessee's husband because they were his heirs and because of the relationship between the assessee and the other partners, the assessee had succeeded by inheritance to her husband in her capacity as partner, and that it was not provided in the partnership deed that after the death of any partner the firm would not be dissolved, and that the firm was not dissolved but had continued, and allowed the assessees' appeal holdiug that the assessee had succeeded to the deceased in her capacity as partner by inheritance. At the instance of the Revenue a reference under Section 256(2) of the Income Tax Act, 1961 was made to the High Court which allowed the refe~ence and held that the assessee was not entitled to the set off of the speculation losses brought forward from earlier years against the speculation profits of the asses- sment year under appeal and that the right to carry forward and set off losses in a business or profession is available under Sections 72 to 7 4 of the Income 'fax Act, 1961 only to the person who has suffered the loss and under Section 78(2) to the person who succeeded in such capacity by inheritance and n
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