Law: Income Tax Act, 1922

Section: 24(1)

Law: Income Tax Act, 1922

Section: 24(1)

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 1949-50 - On 30-3-1949, by virtue of a partial partition of assessee-HUF, its business passed from hands of family to a partnership firm - For assessment year 1948-49, assessee was allowed benefit of section 25(4) of 1922 Act by substitution of loss suffered during broken period 1-4-1948 to 30-3-1949 in place of income actually earned in previous year 1-4-1947 to 31-3-1948 - Whether assessee was not entitled to have loss suffered during broken period set off against income under other heads under section 24(1) of 1922 Act in assessment for next assessment year 1949-50 - Held, yes FACTS The assessee-HUF derived income from business. On 30-3-1949, by virtue of a partial partition of the family assets, the business passed from the hands of the family to a partnership firm. For the assessment year 1948-49, the relevant previous year being the financial year ending 31-3-1948, the assessee claimed the benefit of section 25(4) of the 1922 Act by the substitution of the income of the broken period 1-4-1948, to 30-3-1949, in place of the income actually earned in the previous year 1-4-1947, to 31-3-1948. The business had resulted in a loss during the broken period. ITO allowed relief claimed by the assessee. Again for the assessment year 1949-50 the assessee claimed that it was entitled to set off the loss from the business against the income under other heads by virtue of section 24(1) of the 1922 Act in the assessment proceedings for the assessment year 1949-50. This claim was rejected by the ITO, and he did not set off the loss against the income under other heads. However, on appeal the AAC allowed the assessee's claim but the Tribunal reversed the finding of the AAC and restored that of the ITO. On reference: HELD There exists a distinction between the two categories of exempted sums, those which are exempt from charge as well as from inclusion in the total income and those which are exempt from charge but are liable to be included in the total income. The income of the broken…

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