Law: Income Tax Act, 1922

Section: 24(2)

Law: Income Tax Act, 1922

Section: 24(2)

Section 72 of the Income tax Act, 1961 read with section 24(2) of the Indian Income-tax Act, 1922 - Loses - Carry forward and set off of business loss - Assessment year 1951-52 - ITO refused to set off loss incurred by assessee HUF which carried on business as partner in several firms in earlier years from profits earned in relevant accounting year from other firms within meaning of section 24(2) - Whether loss sustained in a business carried on by a firm in which assessee was a partner could not be set off against profits of business carried on by another firm in which assessee was a partner as business carried on by said firms was not same within meaning of section 24(2) of 1922 Act - Held, yes FACTS The assessee was a HUF and carried on business as a partner in several firms. Up to 1950-51 it was a partner in five firms, A, B, C, D, and E. In the accounting year relevant to assessment year 1949-50 three of the firms showed a loss and two earned a profit and the result was a net loss to the assessee. The firms, D, and E, were dissolved and did not exist in the accounting year relevant to the assessment year 1951-52; instead there came into existence a new firm, F of which the assessee was a partner. In the accounting year relevant to the assessment year 1951-52, there was a profit earned by all the four firms, the total amount of the share of the assessee in the profits being Rs. 34,523. The total amount of its shares in the losses sustained by some of the firms in the accounting years relevant to the earlier assessment years came to Rs. 21,423. The assessee claimed that it was entitled under section 24(2) of the 1922 Act to set off the whole of the loss suffered by it in the earlier years from the profit earned by it in the accounting year. The ITO refused to set off the loss incurred in an earlier year in a firm from the profit earned in the accounting year from another firm; on the ground that the business carried on by a firm could not be said to be the "same" as that carried on by another firm within the meaning of section 24(2). He set off the loss only from the profit of the particular firm, if any, in the accounting year. On appeal the order of ITO…

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