Law:

Section:

Section 77 of the Income-tax Act, 1961 [Corresponding to section 24(1) of the Indian Income-tax Act, 1922] - Losses of unregistered firm - Assessment year 1955-56 - Assessee was partner in unregistered firm - He also had income from other sources like salary, house property and dividends - He claimed to set off loss of unregistered firm against his income from salary, property and other sources - Tribunal rejected assessee's claim - Whether in view of second proviso to section 24(1) of 1922 Act, assessee's claim to set off his share of loss from unregistered firm separately assessed to tax was rightly disallowed - Held, yes FACTS The assessee was a partner in an unregistered firm, having one-half share therein. The ITO had assessed the unregistered firm and computed its total loss. Apart from this partnership in this unregistered firm, the assessee had income from other sources like salary, house property and dividends. The assessee claimed to set off the loss of the unregistered firm against his income from salary, property and other sources. The ITO refused the claim. On appeal, the AAC affirmed the order passed by the ITO. On second appeal, the Tribunal also confirmed the order of the ITO. On reference : HELD Proviso to a section in a Act or statute naturally must have to be read in the context of that particular section and not divorced from it. The second proviso of section 24(1) of the Act 1922 has necessarily to take colour and meaning from the main subject-matter of section 24(1) of the Act. the opening words of section 24(1) of the Act use the expression "Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in section 6 of the Act of 1922 he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in the years. The words 'any assessee' imply an assessee without any qualification and must therefore include an assessee within the definition of the Income-tax Act. According to section 2(2) of the Income-tax Act 1922, an assessee means 'a person by whom income-tax or any other sum of money is payable under this Act, and includes every person in respect…

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