Law: Income Tax Act, 1922

Section: 66(1),24(2),24(1),(2)(ii)(e)

Income-tax Act, 1922 -- Section 24(2) proviso (e) -- Loss -- Carry forward and set off -- Dissolution of registered firm -- Partner continuing the business as sole proprietor in the same name and in the same premises -- Two business, whether the same -- Held yes -- Partner, whether entitled to set off his share of loss in registered firm against profits earned as sole proprietor -- Held yes -- JUDGMENT The judgment of the court was delivered by KHAMISANI J. -This is a reference under Section 66(1) of the Income-tax Act and arises out of the following facts. 2. The opponent, Muhammad Aqeel, was a partner with Muhammad Saeed and Mst. Shamsunnissa in the firm under the name and style of Muhammad Aqeel Co. The firm dealt in textile goods. The partnership was dissolved on the 10th of October, 1953, after which the opponent alone became the sole owner of the firm. The business of the opponent was continued under the same name and in the same premises. 11th of October, 1953 was a Sunday. The business, therefore, continued under the old name from the 12th of October, 1953. The firm, before its dissolution, had suffered a loss of Rs. 98,590 in the assessment year 1952-53 out of which Rs. 32,864 were allocated to the share of the opponent. In the assessment year 1954-55 the share of losses carried forward was adjusted in the individual income of the opponent but the unabsorbed loss was refused to be so adjusted during the four years 1955-56, 1956-57, 1957-58 and 1958-59. The opponent's income was accordingly determined without the adjustment of the unabsorbed loss on the ground that on the dissolution of the firm on the 10th of October, 1953 the business of the firm had discontinued and the unabsorbed loss became capitalized. The opponent was, therefore, refused the benefit of set off under Section 24(2) of the Income-tax Act. The opponent consequently filed an appeal before the Appellate Assistant Commissioner which was dismissed. He thereafter went in appeal before the Income-tax Appellate Tribunal which accepting the appeal held as under:- "From the above it appears that the business activity unquestionably remained the same; the amount of unabsorbed loss may now be…

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