Law:

Section:

Section 67* of the Income-tax Act, 1961 - Firm - Computation of partner's share in income of - Assessment year 1966-67 - Whether when a firm has income under several heads then share of each partner in firm's income will have to be reckoned in accordance with share of that partner in each and every one of heads of income - Held, yes - Whether same rule applies to allocation of loss computed in hands of firm - Held, yes - Firm admitted minors as partners to benefits of partnership and they were not liable for any part of loses of firm - Firm incurred loss under head 'business' and 'Speculative transactions' while earned income under head 'other sources' - Whether business loss and speculation loss of firm could not be set off against income from other sources to arrive at net income to be apportioned between partners - Held, yes Section 247 of the Income-tax Act, 1961 - Appeal by partner - Whether under provisions of section 247, question of apportionment of firm's income as between partners is a fit subject of appeal by firm itself - Held, yes FACTS The assessees were partners in a firm. There were three minors admitted to the benefits of partnership. The firm was in receipt of income under the head 'other sources' and also under 'interest income' during relevant accounting year. The firm sustained a loss in business and also incurred speculation loss. Under the terms of the partnership, the minors were only admitted to the benefits of the partnership which meant and implied that they were not to be mulcted with any share in the losses incurred by the firm. The ITO did not make any allocation of the business loss or the speculation loss to the shares of the minors but the entire share of loss from these sources was allocated between the two major partners. As for the allocation of interest, it was paid to the minors as well as one of the partners, but disallowed and added to the income of the firm. The firm claimed that the allocation in the agreed ratio must be done only after setting off the business loss and the speculation loss as against the income under head 'other sources'. The ITO rejected this scheme of allocation propounded by the assessee. On appeal,…

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