Law:

Section:

Section 72 of the Income-tax Act, 1961 [Corresponding to section 24(2) of the Indian Income-tax Act, 1922] – Losses – Carry forward and set off of business losses – Assessment year 1958-59 – Assessee's father was partner in three firms – Under partnership agreement option was given to surviving partners to continue with partnership by taking heirs of deceased partners as partners by way of inheritance – Assessee's father died and his heirs including assessee were taken as partners – Assessee inherited one-fourth of his father's share of interest in three firms – Assessee claimed that to extent to which he had succeeded to his father's interest in said firms, share of loss in said firms apportionable to father was liable to be allowed in his hands under section 24(2)(iii)(e) of 1922 Act – Whether since heirs of deceased had acquired right as partners by way of inheritance, right to set-off would be available to them under section 24(2)(iii)(e) of 1922 Act – Held, yes – Whether, therefore, assessee was entitled to set-off to extent of one-fourth share of losses of father in firms in question – Held yes FACTS The assessee was son of one ‘J'. On death of ‘J' the assessee inherited one-fourth of his father's share of interest in three firms. There were certain losses which had been apportioned amongst the partners including ‘J'. For the assessment year in question the assessee claimed that to the extent to which he had succeeded to his father's interest in the said firms, the share of loss apportionable to the father was liable to be allowed in his hands under section 24(2(iii)(e) of the 1922 Act. The ITO held that the assessee had not become a partner in the three firms by inheritance, but he had become a partner by his choice, and, therefore, the right to claim a set-off under the provisions of section 24(2)(iii)(e) of the 1922 Act was not available. The Tribunal, however, allowed the assessee's claim. On reference : HELD On a plain reading of section 24(2)(iii )(c) of the 1922 Act, it was quite clear that if the assessee had succeeded as a partner by inheritance then he would be justified in his claim for a set-off of one-fourth share of the losses which were…

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