Judgment:
A. Pasayat, J.
1. On being moved by Mr. Nirmal Chandra Choudhury (hereinafter referred to as ' the assessee ') by an application under Section 256(2) of the Income-tax Act, 1961 (in short,' the Act'), this court directed the Income-tax Appellate Tribunal, Cuttack Bench (in short, ' the Tribunal '), to state a case and refer the following question for opinion :
' Whether the Income-tax Appellate Tribunal was wrong to hold that the provisions of Section 3(1)(f) of the Income-tax Act, 1961, applied to the facts of this case ?'
2. Pursuant to the direction, the Tribunal has stated a case. The background facts are as follows :
The assessee who was earlier carrying on business in his individual capacity entered into a partnership arrangement and a partnership firm styled as M/s. Premier Industries came into existence. The accounting year as followed by the firm ends on September 30 of every year. The assessee has filed a return wherein he indicated his previous year to be March 31, 1980, so far as the assessment year 1980-81 is concerned. It was noticed by the Assessing Officer that the only source of income of the assessee was his share of profit in the partnership firm. Applying the provisions of Section 3(1)(f) of the Act, the period ending on September 30, 1979, was determined to be the previous year for the relevant assessment year. This was questioned in appeal by the assessee before the Appellate Assistant Commissioner of Income-tax, Rourkela Range, Rourkela (in short, ' the AAC'), The Appellate Assistant Commissioner reversed the findings of the Assessing Officer. Being aggrieved, the Revenue carried the matter before the Appellate Tribunal. The stand of the Revenue was that once the firm has a definite accounting period, the same has to prevail in the case of the partner who has a share in the profits of the partnership and that is how Section 3(1)(f) of the Act comes into operation. The stand of the assessee was that he, having exercised his option in terms of Section 3(1)(b), it is not open to the Department to change it. The Tribunal was of the view that Section 3(1)(f) applies to the facts of the case, because the assessee was a partner in a firm which has been assessed by taking the period ending on September 30 to be the previous year. As such, in respect of the assessee's share in the income of the firm, the period adopted for the firm has to be applied. The Tribunal did not state a case though moved under Section 256(1) of the Act and, therefore, this court was moved under Section 256(2) of the Act as indicated above.
3. The only dispute involved in this case is whether the provisions of Section 3(1)(f) of the Act have been rightly applied to the case of the assessee. The question is what would be the previous year applicable to an assessee who is a partner in a firm which is assessed as such.
4. The question has really become academic with effect from April 1, 1989. Section 3(1)(f) as it stood prior to substitution by the Direct Tax Laws (Amendment) Act, 1989, with effect from April 1, 1989, read as follows :
' 3 ' Previous year ' defined,--(1) For the purposes of this Act, 'previous year' means-- . . . (f) where the assessee is a partner in a firm and the firm has been assessed as such, then, in respect of the assessee's share in the income of the firm, the period determined as the previous year for the assessment of the income of the firm ; or ...'
5. Strong reliance has been placed by Mr. Panda on a decision of the Andhra Pradesh High Court in CIT v. R. Y. Singara Mudaliar : [1988]172ITR608(AP) . On going through the decision, we find that the fact situation involved therein was different. As a matter of fact, it was found that the assessee had other sources of income and that he closed his accounts so far as other sources of income are concerned on different dates. That is a distinctive feature.
6. In our considered opinion, Section 3(1)(b), as it stood at the relevant time, was a provision of general nature. It permitted an assessee to exercise option so far as determination of the question of previous year is concerned. Section 3(1)(f), on the other hand, related to a specific class of assessees, i.e., those who were partners in firms which have been assessed as such. It was stipulated that, in such a case, the period determined as previous year for assessment of the income of the firm has to prevail over the general provision contained in Section 3(1)(h). The effect of Clause (f) is that the previous year for the assessment of the income of the firm is statutorily made the previous year of the partner in respect of his share in the income of the firm even if the partner has income from other sources for which he may have a different previous year. A view similar to ours has been expressed by the Kerala High Court in CIT v. M. S. Sheik Rowther : [1962]46ITR259(Ker) while considering a case under Section 2(11)(ii) of the 1922 Act. The provisions of the said section are almost pari materia with the provisions of Section 3 of the Act. The Bombay High Court in CIT v. Mckenzies Ltd, : [1980]121ITR458(Bom) has also expressed a similar view.
7. In view of the analysis made by us above, we find that the Tribunal was justified in its conclusion that Section 3(1)(f) applied to the facts of the case. Our answer to the question referred is in the negative, in favour of the Revenue and against the assessee.
8. The reference is, accordingly, disposed of. No costs.
D.M. Patnaik, J.
9. I agree.