Law: Income Tax Act, 1961

Section: 71

Section 71, read with section 28(i), of the Income-tax Act, 1961 [Corresponding to sections 24(1) and 10(1) of the Indian Income-tax Act, 1922] - Losses - Set off of from one head against income from another - Assessment years 1954-55 to 1956-57 - Whether a partner of an unregistered firm which suffers a loss is entitled to set off his share of loss against his income from other business - Held, no FACTS The assessee-company and 'R' formed a partnership firm known as the Agricultural Company. The Agricultural Company suffered a loss. The assessee claimed to set off its share of loss in the Agricultural Company against its own profits of the relevant year. This claim was disallowed by the Tribunal on the basis of a decision of the High Court in Raza Sugar Co. v. CIT [1970] 76 ITR 541 (All.), wherein the High Court held that as the Agricultural Company had been assessed as unregistered firm and its assessment had become final, no partner could claim to set off its share of loss against its individual income by reason of the provisions contained in the second proviso to section 24(1) of the 1922 Act. In instant reference, the revenue made reference to a of the Supreme Court passed on the special leave petition against the of the High Court in the case of Raza Sugar Company (supra). Wherein the Supreme Court had rejected special leave petition. HELD When the Supreme Court dismissed the special leave petition, no scope was left for the High Court to enter into the question referred to it. Accordingly, it was to be held that the assessee, a partner in the Agricultural Company assessed as an unregistered firm, was not entitled to set off its share of loss therefrom against its other income. Obiter Dicta (Per Gulati, J.) - The question arising out of these cases is of frequent occurrence upon which there is clear cleavage of opinion between the various High Courts. The Bombay High Court in CIT v. Jagannath Narsingdas [1965] 55 ITR 128 , the Gujarat High Court in CIT v. Jethalal Zaverchand Patalia, [1966] 61 ITR 357 , the Andhra Pradesh High Court in CIT v. Vakati Sanjeeva Setty [1962] 46 ITR 755 and the Delhi High Court in CIT v. Ram Swarup Gupta [1973] 92 ITR 495 have…

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