Law: Income Tax Act, 1922

Section: 24(1)

Section 71, read with section 28(i) of the Income-tax Act, 1961 [Corresponding of section 24(1), read with section 10(1) of the Indian Income-tax Act, 1922] - Losses - Set off of from on head against income from another - Assessment year 1953-54 - Assessee, was carrying on business in his individual capacity - He was also a partner in an unregistered firm - Whether assessee was entitled to claim a set-off his share of loss in a business carried on by an unregistered firm, against profits of his personal business - Held, yes FACTS The assessee, as an individual was carrying on business as commission agents and trader. He also carried on some business in kapas in partnership with one 'C'. In the relevant assessment year 1953-54, the assessee had made certain profit in his individual business while suffered loss in the partnership business. The assessee claimed to deduct this loss from the profits and gains in the individual business. The ITO disallowed the same on the ground that the loss in the business of an unregistered partnership was not capable of being adjusted against his profits and gains in his individual business. On appeal the Tribunal took the view that the assessee was entitled to adjust the said loss in computing the profits and gains of his business under section 10 and that the second proviso to section 24 (1) had no application to the case. On reference : HELD Section 16(1)(b) which includes in the total income of an assessee his share of profits from a firm clearly indicates, as pointed out by their Lordships of the Privy Council in Arunachalam Chettiar v. CIT [1936] 4 ITR 173 (P.C.) by reference to the provisions of section 24(2) of the unamended Act, that the Act does not treat the partner of a firm as a separate assessee in so absolute a sense as to prevent his share of the profits in the said partnership business as his income from the business. The treatment of the losses under section 24 will only be for the purpose of setting off losses under different heads. Where the partner of an unregistered firm seeks a set-off or a carry forward and set-off of his losses under one head against profits under another head, no doubt, he will have to…

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