Law:

Section:

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 years 1958-59 to 1961-62 - Whether in view of section 24(1) of 1922 Act, loss incurred by a registered firm in speculative business cannot be taken into account while computing total income of said firm under section 23 of 1922 Act - Held, yes - Whether, further, loss incurred in speculative business cannot be apportioned between partners of registered firm, and, thus, registered firm can claim to have it carried forward and set off in future years against speculative profits - Held, yes FACTS The assessee-firm was earning income from property, readymade business in kappas, and also from speculation business carried on an extensive scale. For the assessment years 1958-59 and 1959-60, the ITO in making the assessment charged tax on the income from property and readymade business and loss on speculation business was not set off against this profit in view of the provisions of section 24(1) of 1922 Act. This loss was, however, apportioned between the partners by the ITO purporting to act under the second proviso to the said sub-section. In the assessment year 1960-61, there was an income from property, and a loss from ready business. In addition there was a profit in the speculation business. Since this year there was a profit in the speculation business, the first proviso to section 24(1) of 1922 Act did not apply, and the net income of the respondent-assessee was worked out by taking all the three figures into account. The respondent claimed that in the assessment of the respondent's income in this year, the respondent was entitled to set off the speculation losses of the two preceding assessment years 1958-59 and 1959-60 against the profits earned from speculation business in this year, urging that the ITO in the two earlier years was wrong in apportioning the loss between the partners. The plea was that, under the second proviso to section 24(1) of 1922 Act, this loss in speculation business could not be apportioned between the partners, and, consequently, under section 24(2) of…

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