Law:

Section:

Section 71 of the Income-tax Act, 1961 (Corresponding to section 24 of the Indian Income-tax Act, 1922) - Losses - Set off of from one head against income from another - Assessment year 1959-60 - Assessee-company entered into a joint venture with two other companies - There was no written agreement on basis of which this joint venture was carried on - Assessee claimed deduction of certain sum being its share of loss in said venture - ITO disallowed loss claimed by assessee observing that in absence of a written agreement, joint venture could only be treated as an unregistered firm and being so, assessee could not set off against its other income loss suffered by it in its joint venture - Whether there was any infirmity in said order - Held, no FACTS The assessee-company entered into a joint venture with two other companies, namely, BBP Limited, and BCC Limited. The accounts for the joint venture were maintained in the books of BBP Limited. On the basis of those accounts, the final results of the joint venture was a loss and the assessee's one-third share of that loss amounted to Rs. 11,875. The assessee claimed deduction of this sum as his share of loss in the joint venture. The ITO expressed the view that in the absence of a written agreement, the joint venture could only be treated as an unregistered firmand the loss suffered by an unregistered firm can be carried forward and set off only against the income of that unregistered firm and could not be allocated to the partners and set off against the other incomes earned by them. Therefore, the ITO disallowed the loss of Rs. 11,875 which the assessee claimed as a deduction for its share of loss in the joint venture. The AAC as well as the Tribunal upheld the said disallowance. HELD It was not this assessee-company which qua the assessee and qua the company was earning this income or making or incurring this loss. The facts found were that this was entirely a different assessee for it was a joint venture of 3 separate companies. The fact found also was that it was a partnership of 3 companies but it was an unregistered firm under the Act. Therefore, profits or losses from this joint venture belonging to an…

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