Law:

Section:

Section 71 of the Income-tax Act, 1961 [Corresponding to section 24(1) of the Indian Income-tax Act, 1922] - Losses - Set off of from one head against income from another - Assessment year 1944-45 - Whether section 24(1) of 1922 Act can only apply to income which has not already suffered tax but income in respect of which tax could be levied and collected - Held, yes - Assessee, who was karta of HUF, was also partner in an unregistered firm - During relevant accounting year assessee received certain amount as a share of profit from aforesaid firm on which tax was collected from firm - However, family incurred certain loss in speculation - Whether taxed share income from unregistered firm could not be set off against loss sustained by HUF in speculation business for purpose of determining loss to be carried forward under section 24(2) of 1922 Act - Held, yes FACTS The assessee, who was a karta of a HUF, was also a partner in an unregistered firm. During relevant accounting year the assessee received certain amount from the aforesaid firm as his share of profits on which tax was collected from the firm. However, the family incurred certain loss in speculation. This loss was set off by the ITO which was affirmed by the AAC against the profits not only of the joint family but also against the taxed share income of the karta from the aforesaid firm. The balance was allowed to be carried forward under section 24(2). The Tribunal reversed the decision of the revenue and held that the loss could not be set off against the taxed share income from the unregistered firm received by the assessee during the year. On reference: HELD In the case of unregistered firms, under section 14, if tax has already been paid by a partner of such firm in respect of any portion of his share in the profits and gains computed in the manner laid down in clause(b ) of sub-section(1) to section 16, it shall not be again liable to be assessed to tax again, the reason being, as the income had already suffered tax it could not be subjected to double taxation. But under section 16 the amount so exempted from further taxation is not excluded in computing the total income of the assessee. The result…

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