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Issues Involved:
1. Inclusion of loss-share of wife and minor son in the total income of the assessee under section 16(3) of the Indian Income-tax Act, 1922. 2. Set-off of loss-share of wife and minor son against their other income before including the same in the total income of the assessee. Detailed Analysis: Issue 1: Inclusion of Loss-Share of Wife and Minor Son in the Total Income of the Assessee The primary issue was whether the loss-share of the wife and minor son of the assessee in a registered firm should be included in the total income of the assessee under section 16(3) of the Indian Income-tax Act, 1922. The assessee, a non-resident individual, had income from property, interest, dividends, and a share in a registered firm. His wife and minor son, who were also non-residents, had income from interest and shares in the same firm, which was included in the assessee's total income under section 16(3). The firm, Terrace Nilgiri Tea Estate Co., incurred a net loss of Rs. 11,322 for the assessment year 1958-59, and the loss was apportioned among the partners, including the assessee, his wife, and his minor son. The Income-tax Officer included the interest income of the wife and minor son in the assessee's total income but did not consider their share of the loss from the firm. The contention was that the term "income" in section 16(3) did not include loss, and hence, the loss-share of the wife and minor son should not be included in the assessee's total income. The Tribunal upheld this view, stating that the term "income" in section 16(3) did not mean or include loss. The sub-section aimed at preventing tax evasion by including certain income of the wife or minor child in the total income of the assessee. The section did not contemplate the inclusion of a loss-share. Issue 2: Set-off of Loss-Share of Wife and Minor Son Against Their Other Income The second issue was whether the loss-share of the wife and minor son should be set off against their other income before including the same in the total income of the assessee. The Income-tax Officer and the Appellate Assistant Commissioner rejected this contention, holding that section 16(3) did not come into operation unless there was positive income of the wife or minor child. The term "income" in section 16(3)(a) was interpreted to mean only positive income and not a loss. The Tribunal also rejected this contention, stating that the scheme of section 16(3) did not provide for setting off loss under one sub-clause against income under another sub-clause. The sub-section aimed at including the income of the wife or minor child in the total income of the assessee, without any concept of set-off or deduction. Conclusion: The High Court held that the term "income" in section 16(3) did not include loss and that the loss-share of the wife and minor son should not be included in the total income of the assessee. The Court also held that the loss-share should not be set off against their other income before including the same in the total income of the assessee. The answers to both questions were in the negative, and the assessee was ordered to pay the costs of the reference.
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