Law: Income Tax Act, 1961

Section: 64

Income-tax---Total income---Inclusions---Firm---Wife partner of firm in which husband is a partner---Inclusion of wife's share in husband's total income---Husband entitled to carry forward wife's share of loss also---Income-tax Act, 1961, S. 64(1)(i) (before amendment w.e.f. 1-4-1980), S. 64, Expln. (inserted w.e.f. 1-4-1980). The assessee and his wife were the two partners of a firm each having a half share in the profits or losses. The question was whether the assessee could claim to add his wife's share of the loss of the firm to his share for carry forward and set-off against his future business income. The Income-tax Officer and the Appellate Assistant Commissioner held that he could not, but the Appellate Tribunal held that he could. On a direct reference to the Supreme Court under section 257 of the Income-tax Act, 1961, in view of a divergence of judicial opinion between the Karnataka and Gujarat High Courts. Held, affirming the decision of the Tribunal, that the assessee was entitled to carry forward to subsequent years not only his share but also the share of his wife in the loss of the firm. C.I.T. v. J.H. Gotla (1985) 156 ITR 323 (SC) applied. Explanation 2, inserted in section 64 of the Income-tax Act, 1961, with effect from 1st April, 1980, though not retrospective in its operation, serves as a legislative exposition of the import of section 64(1)(i). C.I.T. v. Badri Prasad Agarwal (1983) 142 ITR 353 (MP); C.I.T. v. Manilal Dhanji (1962) 44 ITR 876 (SC); Dayalbhai Madhavji Vadera v. C.I.T. (1966) 60 ITR 551 (Guj.); Kapadia (T.P.) (Dr.) v. C.I.T. (1973) 87 ITR 511 (Mys.); Manickam & Co. v. State of Tamil Nadu (1977) 39 STC 12 (SC) and (1977) AIR 1977 SC 518 ref. (b) Income-tax--- ----Interpretation of statutes---Subsequent insertion of explanation---Serves as legislative exposition---Indian Income-tax, 1961, S. 64, Expln. 2. . STATEMENT OF CASE By this application, the Commissioner of Income-tax requires the Appellate Tribunal to state a case and refer, for the decision of the Hon'ble High Court of Judicature at Madras, a question of law said to arise out of the order of the Tribunal dated 26th January, 1975, in I.TA. No. 1480 of 1972-73. We…

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