Law:

Section:

Section 75 of the Income-tax Act, 1961 - Losses - Set off and carry forward of registered firms - Assessment year 1963-64 - Whether in view of provision of section 75(2), a registered firm can not have its losses from speculation business in one year carried forward and set off from speculation profits in another year - Held, yes FACTS The assessee, a registered firm, carried on speculation business besides other business activities. During the assessment year 1962-63, it suffered loss in speculation business, while in assessment year 1963-64 the firm made profit in speculation business but loss in other business. The ITO determined the assessee's total income after deducting from the profit in speculation the loss incurred in the same year from his other business. He rejected the assessee's plea for set off of the speculation loss of preceding year against the speculation profit for the year under reference, and held that the speculation profit had to be allocated as per the provisions of the Act amongst the partners. On second appeal, the Tribunal held that the provisions under the 1961 Act, were analogous to the provision of the 1922 Act so far as carry forward and set off of speculation losses were concerned, and therefore, the speculation loss determined for the years 1962-63 was to be set off against the speculation profit of the relevant assessment year. On reference: HELD Under the 1922 Act, there was a clear link between the apportionment of the losses amongst partners and the disability or disqualification of a registered firm to carry forward losses which had been apportioned amongst the partners. In the 1961 Act this link or connection between the two is not to be found. On the other hand a clear ban is placed by sub-section (2) of section 75 on carrying forward and set off of losses under the three distinct heads of income from profits other than speculation business (section 72) or losses in speculation business (section 73) and losses under the head 'Capital gains' (section 74) when the assessee is a registered firm. It was because of this clear connection between the apportionment of losses amongst the partners under the second proviso to…

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