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PETITIONER: THE COMMISSIONER OF INCOME-TAX,BOMBAY CITY II, BOMBAY

       Vs.

RESPONDENT: M/s.  JADAVJI NARSIDAS & CO.

DATE OF JUDGMENT: 12/10/1962

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. KAPUR, J.L. SARKAR, A.K.

CITATION:  1963 AIR 1497            1963 SCR  Supl. (1) 609

ACT: Income  Tax-Set-off-Profits  of  registered  firm  and  loss incurred  in  unregistered  firm-Findings  of  Tribunal-When binding  on  High Court-Indian Income-tax Act, 1922  (11  of 1922), ss. 24, 66 (2).

HEADNOTE: The  respondent,  a firm consisting of  four  partners,  was registered  under the Indian Income-tax Act, 1922.  For  the assessment  year 1946-47 it claimed to set off a sum of  Rs. 1,05,641,  as  its share of the loss in respect  of  certain transactions  said to have been carried on in the name of  D by  another  partnership  between it and D,  which  was  not registered.   The income-tax authorities rejected the  claim and the Appellate Tribunal agreed with their decision on the grounds  (1) that it being admitted that the ankdas were  in the  name of D, there was no satisfactory evidence that  the assessee did business in the joint account, and (2) that, in any  case, the assessee could not claim the set-off  as  the loss was suffered by an unregistered firm. 610 On  a reference, the High Court held (1) that there  was  no legal admissible evidence to justify the Tribunal’s  finding that  the  transactions in question were not  those  of  the assessee, and (2) that the assessee firm could claim a  set- off in respect of the share of loss in the unregistered firm "if the income-tax authorities did not proceed to  determine the losses of the unregistered firm and did not bring it  to tax as permitted by s. 23 (5) (b)." Held, that the High Court erred in its view that the  asses- see  firm  could  claim a set-off in  respect  of  the  loss incurred in the unregistered firm. Held,  further (per Kapur and Hidayatullah,.JJ.) : (1)  that if under s. 66 of the Indian Income-tax Act, 1922, a finding given  by the Appellate Tribunal is to be considered  final, it  is necessary that the reasons for reaching it should  be stated  by the Tribunal with sufficient fullness  to  inform all concerned what they are. (2)  that there could not be a partnership between D and the registered firm.  If there was a partnership it was  between D  and  the  four partners of the  assessee  firm  in  their

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individual  capacity, and under the provisions of s.  24  of the  Act  the  loss of Rs. 1,05,641 could  not  be  set  off against the profits of the registered firm. Per  Sarkar, J.-In view of the decision in Dulichand  Laksh- minarayan v. The Commissioner of Income-tax, Nagpur,  [1956] S.  C R. 154, that a firm as such is not entitled  to  enter into  partnership  with  another firm  or  individuals,  the assessee  firm could not in law enter into partnership  with D,  and  the questions answered by the High  Court  did  not really arise in the present case.-

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 545 of 1961. Appeal  from the judgment and order dated October 23,  1958, of  the Bombay High Court in Income-tax Reference No. 23  of 1958. K.   N.  Rajagopal  Sastri  and  R.  N.  Sachthey,  for  the appellant. Purushottam  Trikamdas, S. N. Andley, Rameshwar Nath and  P. L. Vohra, for the respondent.  611 1962.  October 12.  The following judgments were  delivered. The judgment of Kapur and Hidayatullah, jj. was delivered by Hidayatullah, J., Sarkar, J., delivered a separate judgment. HIDAYATULLAH  J.- This is an appeal by the  Commissioner  of Income-tax,  Bombay., against the judgment and order of  the High  Court of Bombay dated October 23, 1958, by  which  the High Court answered two questions referred to it under s. 66 (2)  of  the  Income-tax Act in  favour  of  the  respondent jadavji Narsidas & Co. The High Court certified this case as fit for appeal to the Supreme Court and hence this appeal. The facts are simple.  The year of account is the S. Y. 2001 corresponding to October 10, 1944, to November 4, 1945,  and the  assessment  year is 1946-47. The respondent is  a  firm consisting of four partners and was registered under section 26A  of  the  Income-tax Act for  the  relevant  year.   The assessee   firm   carries  on  business  which   is   mainly speculation.  In the year of account it claimed inter alia a loss of Rs. 1,05,641 which it was said, arose in speculation in  a venture of the assessee firm with one Damji  Laxmidas. This venture was carried on in the name of Damji Laxmidas on behalf of an alleged firm in which Damji was said to have  a share of /6/- and the assessee firm the balance.  A deed of partnership  dated  November  14, 1944,  was  also  produced before  the  Income-tax Officer.  The sum  of  Rs.  1,05,641 represented half the losses of the joint venture, the  other half  being claimed by Damji in his own  individual  assess- ment.  The so-called firm of Damji Laxmidas and the assessee firm  was  an unregistered one.   The  Income-tax  Officer., Bombay,  disallowed these losses and added back this  amount along  with  some  others to convert a loss  of  Rs.  55,931 declared by the assessee firm into a profit of Rs. 1,88,575. This profit was carried by him in accordance with the  share of the partners into their individual assessment. 612 In the assessment of Damji, it may be stated here, the  loss was  not  allowed  on the ground that having  arisen  in  an unregistered partnership, it could only be considered in the assessment  of the unregistered partnership.   In  rejecting the  evidence of the loss of Rs. 1,05,641 in the  assessment of  the  assessee  firm the Income-tax  Officer  gave  three reasons  (i)  that  the ankdas were in  the  name  of  Damji Laxmidas and not in the name of the unregistered firm or the

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assessee  firm,  (ii) that the assessee  firm  claimed  only 18/- of the losses and riot /10/- according to its  share and (iii) that the assessee firm which was a well-known firm doing  extensive business was said, surprisingly enough,  to have entered into a partnership wit an insignificant  person like Damji Laxmidas to carry on this vast business.  He held that the assessee firm had purchased these losses from Damji Laxmandas to be able to set them off against its profits  to avoid  tax.  The Appellate Assistant Commissioner  dismissed the  appeal  filed  by the assessee firm  and  so  also  the Appellate  Tribunal.   The  two  members  of  the  Appellate Tribunal  gave different reasons.  The judicial Member  (Mr. A. R. Aggarwal) observed:               "So far as the last item No. (3) is  concerned               we  are not satisfied that really the loss  of               Rs.  1,05,641/- was the loss of the  assessee.               It is admitted by the assessee that the ankdas               are in the name of Damji Laxmidas.  By no evi-               dence  we are satisfied (sic) that really  the               assessee  did business in the  joint  account.               Consequently,  this claim of the  assessee  is               disallowed."               The Accountant Member (Mr.  P. C. Malhotra)               observed :               "I agree with my learned brother in the  order               which  he has passed.  I would, however,  like               to  add  a  few words.  It  is  not  even  the               assessee’s  case that loss of  Rs.  1,05,641/-               was suffered by it.               613               According  to the assessee it did  some  joint               venture  transactions  with  Damji   Laxmidas.               Damji Laxmidas came in appeal to the  Tribunal               in  respect of his share of the loss.  It  was               held  that the loss arising to a person  in  a               joint   venture  cannot  be   allowed-in   his               personal assessment as the loss is suffered by               an  unregistered partnership.  It can only  be               carried   forward  in  the  account  of the               unregistered firm." The assessee firm applied to the Tribunal asking that a case be  stated to the High Court but failed.  The assessee  firm then  moved  the  High Court under section  66  (2)  of  the Income-tax  Act  and under the High  Court’s  direction  the Tribunal stated a case on the following questions               "(1)  Whether there was any legal,  admissible               evidence  to  justify the  Tribunal’s  finding               that  the transaction in question was not  the               transaction of the assessee.               (2)   If  not, whether the assessee can  claim               the  set-off of such loss although it  is  the               loss of an unregistered partnership." The  first  question arises out of the observations  of  the judicial  Member and the second question from those  of  the Accountant  Member.   The  High  Court  answered  both   the questions against the Department.  It held that there was no legal  admissible evidence to justify the finding  that  the transactions in question were not those of the assessee firm and further that the assessee firm could claim a set-off  in respect  of the share of loss in the unregistered  firm  "if the  Income-tax Authorities do not proceed to determine  the losses  of the unregistered firm and do not bring it to  tax as permitted by s. 23(5)(b)." On  the  first question the appellant argues that  the  High Court has decided the case as an Appeal

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614 Court  which it was not entitled to do.  This is not a  true representation  of  what the High Court did.   Whenever  the question  propounded  is whether there is  any  material  on which  a  finding can be given the discussion savors  of  an appellate approach but it is not so.  The High Court noticed that  the  Tribunal had picked up only one reason  from  the order  of the Income-tax Officer and held that the  assessee firm  had "’purchased losses" from Damji Laxmidas  but  said nothing  about  the other reasons which had  influenced  the Income-tax  Officer.  The High Court, however, examined  all the reasons given by the Income-tax Officer and reached  the conclusion that there was no evidence to justify the finding which had been given in the case. Before  examining  the  evidence  ourselves  to  see   which conclusion  is  justified,  we wish to make  a  few  general observations.   In a reference under s. 66, a finding  given by  the  Tribunal  is considered final and  the  High  Court accepts  it without examination of the material.   The  High Court does not hear an appeal but answers certain  questions of  law in the light of the facts proved.  If a  finding  is final  in  this way, one does expect that  the  reasons  for reaching it will at least be stated with sufficient fullness to inform all concerned what they were.  Even if the reasons given  by an inferior Tribunal are not restated, at least  a general approval of them, or such of them as are acceptable, should appear.  In the present case, all that is stated is               "It  is  admitted  by the  assessee  that  the               ankdas are in the name of Damji Laxmidas.   By               no evidence we are satisfied (sic) that really               the   assessee  did  business  in  the   joint               account." This,  by itself, is hardly a fair disposal of the  question whether  the assessee firm did business in a  joint  account with one Damji Laxmidas.  The solitary ground for  rejecting the claim is too indefinite to  615 warrant  this  conclusion.  It is contended that  we  should take  into account also the reasons given by the  Income-tax Officer which were before the Income-tax Tribunal and  which have also been mentioned in the statement of the case.   The High Court did so and we allowed those reasons to be brought before  us.  We would, however, have preferred if the  order of the Tribunal in the appeal filed by the assessee firm had even  briefly expressed their approval of those reasons  and not left them to be mentioned in the statement of the case. The question, then, is whether there was evidence to justify the  Tribunal’s  finding that the  transactions  with  Damji Laxmidas were not the transactions of the assessee firm.  In such  an inquiry the Court looks not to the  sufficiency  of the  evidence but whether any evidence exists at all.   Even if  there  be  slight evidence which  was  believed  by  the Tribunal  and  on which the conclusion can be  rested,  such question  must  be  answered in the  affirmative.   But  the finding  must  not  proceed upon  conjecture,  suspicion  or surmise.   If  there  is not a scintilla  of  evidence,  the finding  cannot be sustained because the proved facts  would not then support the inference. In  this  connection,  the  Income-tax  Officer  gave  three reasons.  The most important of which being the ankdas  were in the name of Damji.  According to the deed of partnership, which  has been produced in the case, the four  partners  of the assessee firm and Damji had entered into a  partner-ship to  do  business  together, specifying  the  shares  of  the partners  of the assessee firm which shares inter se are  in

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the same proportion as their interest in the assessee  firm. The  new firm was not given a trade name.  This is no  doubt an unusual feature.  But if no name was given then  business could  be  carried can only in the name or names of  one  or more  partners.  That Damji’s name was chosen, and  not  any other, does not lead to the inference that business was  not done, If Damji’s 616 name  was used then it is reasonably clear that  the  ankdas would be in his name and that is how the matter stood. The next reason is that the losses were claimed on the basis of  half and half by the assessee firm and Damji,  in  their respective assessments contrary to the proportion of /10/- and /6/-  as in the deed.  What ever may be  said  of  the losses  claimed by Damji which were in excess of the  agreed share the same cannot be said of the assessee firm which  is claiming  a share of losses which is less than the  a  greed rate.  But sometimes additional responsibility is shouldered by a partner because of some action taken by him not meeting with  the approval of the others.  Often enough  the  shares are readjusted by agreement.  There may be many reasons  why the loss claimed by the assessee firm was less than what  it could  have  really  claimed but this hardly  leads  to  the inference that no business was done.  This circumstance also does not lead to the inference which has been drawn from it. The third reason is that it is unlikely that the partners of a  big  firm  like the assessee firm  would  enter  into  an agreement  with  a comparatively small’ man for  doing  such vast business.  It is pointed out that Damji had at no  time paid  Income-tax in excess of Rs,. 1,300.  The  accounts  of the  new partnership have been exhibited in the case.   They show a long course of business.  The total business done was to  the tune of Rs. 9 lacs odd.  As speculative business  is made  up, almost always, of either loss or profit we  should also  look to the extent of the profits made and not  merely the losses.  In this case, but ’for one or two  transactions which  miscarried, Damji would have made a huge profit.   It is  possible that he was chosen as a partner In view of  his acumen  in these matters rather than his ability to  finance the projects.  This is not to say that buying of losses’  is not common or that men of straw are not taken on as partners to give up                             617 their  losses  to  equalise  profits  elsewhere.  The   fact remains,  as pointed out by the High Court, that losses  can only be bought if they have been incurred and in the present case  there  is a long course of business which  at  certain stages was profitable though ultimately it showed a loss. it is  impossible  to say in this case that the  assessee  firm took  over losses without actually having done  business  in company  with Damji.  There is no foundation, whatever,  for the inference that the losses were purchased by the assessee firm  from  Damji whether we take the reasons given  by  the Income-tax Officer individually or collectively.  We are  of the opinion that the High Court did not exceed its powers in examining  the evidence in support of the inference  of  the Income-tax Officer that no business was done in company with Damji  but the assessee firm took over some of  his  losses. The  answer  of  the High Court to  the  first  question  is therefore upheld. This brings us to the second question and it is whether  the assessee  firm can set off the loss of Rs. 1,05,641  against its  other profits from its other business?  The High  Court has  held that it can do so. In our opinion, and we  say  it

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with great respect, the High Court was in error in  reaching this conclusion. To  begin with the assessee firm as a firm could  not  enter into a partnership with Damji.  Damji could be admitted into the assessee firm or the members of the assessee firm  could enter  into  a partnership with Damji  in  their  individual capacity.   The assessee firm however could not do so  as  a firm.   This  was  held  by  this  Court  in  Dulichand   v. Commissioner   of   Income-  tax(1).   There  was   thus   a partnership  between  Damji  and the  four  members  of  the assessee  firm  acting for themselves and  indeed  the  deed which has been produced in this case shows as much.  In  the affairs  of the unregistered firm, the assessee firm had  no locus standi.  There were thus two distinct (1)  [1956] 29 I. T. R. 535. 618 partnerships.    One  was  the  assessee  firm   which   was registered COnsisting of four partners and the second was an unregistered  firm consisting of five partners of  whom  the fifth was Damji. The  provisions  which bear upon the question are  many  and need  not  be set out at length.  The gist of  the  relevant sections  will be stated by us in this judgment.   Under  s. 24(1)  an assessee sustaining a loss of profits in any  year under any of the heads mentioned in s. 6 is entitled to have the  amount of the loss set off against his income,  profits or  gains under any other head in that year.  From April  1, 1953, loss sustained in speculative transactions can only be set  off  against  profits  arising  in  the  same  kind  of business.   In  the present case, both the  profits  of  the assessee  firm and the loss in the transactions  with  Damji arose  out  of  speculation and no  difficulty  arises.   By assessee  in the section is meant the person by whom tax  is paid  and in every instance it is necessary to find out  who that assessee is.  In this case the assessee is a registered firm  of  four  partners and  these  partners  did  business resulting  in  profits as members of the assessee  firm  and also as members of another unregistered firm which led to  a loss. Now the ’assessment of firms is done differently accordingly as  they  are registered or unregistered.   Section  23  (5) states that when the assessee is a firm the total income  of the  firm must be assessed but if the firm is  a  registered firm the tax payable by the firm is not to be determined but the  total income is to be carried to the assessment of  the partners in accordance with their shares and the profits  or losses,  as  the case may be, must be assessed  as  part  of their  other income.  But when the assessee is  an  unregis- tered firm, the assessment is of the firm itself unless  the Income-tax Officer finds that by assessing the  unregistered firm as a registered firm more tax is likely to result.  The assessment otherwise is of the unregistered firm and not  of the partners in their  619 private assessment.  This is the gist of the rule  contained in the fifth sub-section of s. 23. There  are,  however, other provisions which  must  also  be noticed.   The  first provision to notice is s. 16  (1)  (b) which  says that when the assessee is a partner of  a  firm, then  whether the firm has made a profit or loss, his  share (whether  a net profit or a net loss) is to be  computed  in the  stated manner and if his share so computed is  a  loss, such  loss may be set off or carried forward and set off  in accordance with the provisions of s. 24. Section 24 then provides for the set off of the loss as well

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as  the  carrying forward of the loss.  The  second  proviso deals  with  the  question of set off in  relation  to  both registered  and  unregistered firm.  It says that  when  the assessee  is  an  unregistered  firm  (not  assessed  as   a registered  firm) the loss can only be set off  against  the income.,  profits  and gains of the firm and  not  those  of partners, but if the assessee is a registered firm, the loss which  cannot  be set off against the  income,  profits  and gains of the firm shall be apportioned  among  the  partners and they alone shall be entitled   to  have  the  amount  of loss  set off under the section. Shortly stated, the  losses incurred by an unregistered firm can be set off only against its  own profits while the net losses of a  registered  firm are  apportioned among the shareholders and they  alone  are entitled to set them off. Then come the provisions with regard to the carrying forward of  the losses under section 24 (2).  Here also there  is  a difference  between registered and unregistered firms.   The difference continues the distinction made by the proviso  to sub-s.  (1) which we have just noticed.  Proviso  (c)  deals with a registered firm and partners in unregistered firms in the same manner as the proviso to sub-s. (1) above analysed. It says that (a) a registered firm is not entitled to  carry forward and set off any loss apportioned between the partners and (b) partners in unregistered  firms assessed as such are likewise not entitled to carry  forward and set off against their own income losses sustained by the firm.   An unregistered firm assessed as a  registered  firm comes under (a) above. What  then is the position here ? The unregistered firm  has not  been  assessed.   The  assessee  firm  alone  has  been assessed  and on its own assessment it has shown  a  profit. It  seeks  to  set off against its profits  a  loss  of  Rs. 1,05,641   which,  it  is  said,  was  incurred  by  it   in partnership with Damji.  We have shown above that there  can be  no  partnership  between the assessee  firm  and  Damji. There  was however a partnership between Damji and the  four partners of the assessee firm in their individual capacity . Now  under s. 24 (1) 2nd Proviso the losses of the  unregis- tered firm of Damji and these four partners can only be  set off   against   the  income,  profits  and  gains   of   the unregistered  firm and not those of its partners.  The  loss of Rs. 1,05,641 could be set off against the income, profits and gains (if any) of the unregistered firm of five  persons and  not of the partners.  In the same manner the  loss,  if not absorbed, could be carried forward to be set off against further  income, profits and gains of the same  unregistered firm  of five persons.  The High Court was thus in error  in holding  that  those  losses could be set  off  against  the income  of the assessee firm.  It makes no  difference  that the  Department  has not assessed the unregistered  firm  or taken  action under s. 23 (5) (b).  What the High Court  has ordered just cannot be done as it is against the  provisions of s. 24. Whether  the partners in their individual assessments  would be able to take advantage of s. 16 (1) (b) and the  decision of  the Privy Council in Arunachalam Chettiar v.  Income-tax Commissioner (1) (a point almost conceded before us), is not a  matter  on  which we need pronounce  our  opinion.   That question  does not arise for our consideration.  The  answer of (1)  (1936) L. R. 63 I. A. 233.                             621 the  High Court to the second question is set aside and  the question is answered in the negative.  In view of the  equal

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success  parties will bear their own costs here and  in  the High Court. SARKAR.,  J.-The  respondent, a firm  registered  under  the Income-tax Act, 1922, claimed in its assessment to that  tax for the year 1946-47, a set off for a sum of Rs.  1,05,641/- as  its  share of the loss of another  partnership  said  to exist  between  it  and one Damji Laxmidas  and  which,  for convenience,  I  will  call  the  bigger  partnership.   The Income-tax  Officer  refused to allow the set off  on  the ground that the existence of the bigger partnership had  not been established. The  respondent  firm’s  appeals,  first  to  the  Appellate Commissioner  and  then to the Appellate Tribunal  from  the order of the Income-tax Officer failed.  Thereafter pursuant to  an order obtained by the respondent firm from  the  High Court of Bombay, two questions were referred by the Tribunal to  that  Court for decision.  Both  these  questions  were. answered  by the High Court against the Department  and  the Commissioner  of Income-tax has thereupon filed the  present appeal. The  first  of these questions is, "Whether  there  was  any legal admissible evidence to justify the Tribunal’s  finding that the transaction in question was not the transaction  of the  assessee".   Now  it has been held  by  this  Court  in Dulichand Lakshminarayan v. The Commissioner of Income  tax, Nagpur  (1) that eta firm as such is not entitled  to  enter into  partnership  with another firm or  individuals".   The respondent firm, therefore, as a firm could not in law  have entered into any partnership with Damji.  It would hence  be to  no  purpose  to enquire whether there  was  evidence  to justify  the finding that such a partnership existed  or  in other words, to enquire whether the evidence showed that  an agreement of partnership (1)[1956] S.C.R. 154,163. 622 which in law could not be made had in fact been made.   That which the law does not recognise does not for a court of law exist.   I think therefore that the first question does  not really arise and no answer to it need be given. The  second  question which was referred to the  High  Court was, "If not, whether the assessee can claim the set off  of such  loss,  although  it is the  loss  of  an  unregistered partnership." As framed, this question is posed only if  the first  question is answered in the negative.  As in my  view the  first question does not arise at all, I  will  consider this question independently of the first.  The High Court  , s  answer to this question was that the respondent firm  can claim  the  set  off  and  this  answer  was  based  on  the assumption  that  a  partnership  between  a  firm  and   an individual is permissible, an assumption which must be  held to  be  unwarranted in view of the decision  in  Dulichand’s case.(1)  It must be held that no partnership in  which  the respondent  firm  as  such is a  partner,  exists.   If  the partnership does not exist, the respondent firm cannot  have suffered any loss as a partner in it and there is  therefore no loss for which it can claim a set off. The  sections  of  the Act dealing with set  off  would  not justify a set off in such circumstances.Thus under s. 10  an assessee is entitled to set off the loss incurred by him  in one  business  against the profits made by  him  in  another business : see Anglo French Textile Co. Ltd. v. Commissioner of Income-tax (2).  It is hardly necessary to point out that in  the  case of a single business its profits can  only  be ascertained after its losses have been taken, into  account. If  this  also is to be called a set off, I suppose  it  may

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also be justified under s. 10.  It is clear that the set off contemplated  by this section is of a loss suffered  by  the assessee  himself.  That is not the position in the  present case.  The assessee, the respondent firm, has no interest in the bigger partnership (1) [1956] S. C. R. 154, 163. (2) [1953] S. C. R. 448,453. 623 and, therefore, no concern with its losses.  Sub-section (1) of s. 24 also provides for set off by an assessee of a  loss suffered by him under one head of income against the profits earned  by him under another head.  This section  would  not assist the respondent firm or the same reason as in the case of. 10 and also because it applies when two heads of  income are being considered while in the present case we have  only one  head of income, namely., business.  The second  proviso to sub-sec. (1) of s. 24 provides for certain rights of  set off in the case of assessment of unregistered and registered firms.   That  part  of this proviso  which  deals  with  an unregistered firm cannot obviously apply to the present case which  is  one of the assessment of  registered  firm.   The other  part  of the proviso dealing with a  registered  firm would  not assist the respondent firm either though it is  a registered firm, because the right of set off that it  gives is only to the partners of a registered firm and not to  the registered  firm itself and in the present case we  are  not concerned  with  a claim of set off by any partners  of  the respondent  firm.  No other section of the Act dealing  with set off has been brought to our notice. The  second  question should therefore be  answered  in  the negative.   Strickly speaking, this question also  does  not arise.   As  the  bigger  partnership  does  not  exist,  no question of its being registered or otherwise can arise. Learned  counsel for the respondent firm  however  contended that the bigger partnership was really between Damji and the partners of the respondent firm.  I will assume that to have been  so.   It  may be that in such a  case  the  individual partners   of  the  respondent  firm  in  their   respective assessments may claim a set off of their shares of the  loss of  the  bigger  partnership but with  such  assessments  of individual  partners  this  case  is  not  concerned.    The question here is whether the respondent firm can claim a set 624 off  in its own assessment.  I venture to say that  it  does not follow that because the partners of the respondent  firm may in their individual assessments be able to claim the set off, the respondent firm itself can do so they are different assessees each with a separate and independent right of  set off.   One cannot claim a set off basing such claim  on  the other’s right to it, But it was said that in the present case the real  assessees were  the partners of the respondent.  I am entirely  unable to  accept  that  contention.   Section  23(5)  of  the  Act contemplates a registered firm as an assessee though it  did not  have  to pay any tax itself as the law stood  prior  to April  1, 1956.  The whole proceedings in the  present  case have  been conducted on the basis that the  respondent  firm was  the assessee.  The questions raised in this  case  were framed  on that basis and we are not called upon by them  to say  whether  the partners of the respondent  firm  had  any right  of’ set off.  The assessees in the present case  were not  the partners of the respondent firm.  If they were,  we would  have found the respective incomes of  the  individual partners  from other sources being considered but  this  was not  what had happened.  It seems to me to be impossible  to

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contend  in  the present case that the  assessees  were  the partners of the respondent firm. I would allow the appeal with costs here and below. By COURT : In view of the opinion of the majority the answer of  the High Court to the first question is upheld  and  the answer  to  the second question is set aside.   The  parties will bear their own costs here and in the High Court.                             625