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 1951-52 - In preceding two years to relevant assessment year, assessee carried on business of liquor contracts in individual name and suffered loss - During relevant assessment year, he constituted a partnership with ten other persons and took another liquor contract in firm's name - Firm made profits - Whether assessee was entitled to set off of loss incurred in previous assessment years against his share of income from firm during relevant assessment year - Held, yes FACTS In the two preceding accounting years, relevant to assessment year, the assessee took certain contracts for sale of liquor in individual name and sustained loss. During the relevant assessment year, the assessee constituted a partnership firm with ten other persons and took another liquor contract in the firm's name. The firm made profit. The assessee claimed that he was entitled to carry forward and set off of the loss incurred in the earlier years against his share of profit from the firm. The ITO rejected assessee's claim. On appeal, the AAC set aside the order of ITO. On revenue's appeal, the Tribunal confirmed the order of the ITO. On reference : HELD In the case of Sitaram Motiram Jain v. CIT [1961] 43 ITR 405, 412, 413 (Guj.), it was held that it was clear from provisions of section 24(2)(iii ) of 1922 Act that where a business carried on by a person on his sale account was continued by that person in partnership, with another, the provisions relating to set-off would apply. In the instant case, in all the years the business was a liquor business and, therefore, the same business. Consequently, the assessee was entitled to set off the loss incurred in previous assessment years 1949-50 and 1950-51 against his share of income during the relevant assessment year. Note : Decision was in favour of assessee. CASES REFERRED TO Birt, Potter and Hughes Ltd. v. CIR (1926) 12 Tax Cas. 976, CIT v. International Industries Ltd. [1952] 22 ITR 44, CIT v. Prithvi Insurance Co. Ltd. [1967] 63 ITR 632 (SC), Gordon and Blair…

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