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Interpretation of section 24(2) of the Income-tax Act regarding the set-off of assessable profits against losses suffered by a deceased partner in a partnership. Detailed Analysis: The case involves a partnership between Hiralal and his nephew Jayantilal, where Hiralal passed away intestate, leaving behind his widow Bai Mani. Following Hiralal's death, a new partnership deed was executed between Jayantilal and Bai Mani to continue the business. The partnership had incurred losses during the years when Hiralal was alive, which were carried forward. In the assessment year 1955-56, Bai Mani sought to set off these losses against the profits earned by the partnership. The main contention was whether Bai Mani, as the widow of the deceased partner, had succeeded to her husband's share in the partnership by inheritance, allowing her to claim the benefit of the losses suffered by Hiralal. The Tribunal ruled in favor of Bai Mani, stating that she had indeed succeeded to her husband's share in the partnership by inheritance, thereby allowing her to set off the losses under section 24(2) of the Income-tax Act. The Tribunal's decision was based on the fact that the partnership agreement allowed for the surviving partner to purchase the deceased partner's share, but in this case, no such action was taken, and the business continued with Bai Mani becoming a partner. The Tribunal considered various factors such as the quantum of interest Hiralal had, the capital brought into the partnership, and the conduct of the partners to conclude that Bai Mani had inherited her husband's share. The High Court upheld the Tribunal's decision, emphasizing that the question of whether Bai Mani succeeded to her husband's share in the partnership was a question of fact. The Court noted the specific provisions of section 24(2) and the proviso regarding changes in the constitution of a firm, highlighting that for the losses to be set off, there must be a succession by inheritance. Given the evidence and circumstances of the case, the Court found no reason to interfere with the Tribunal's conclusion, affirming that Bai Mani was entitled to claim the set-off of losses against profits. In conclusion, the High Court answered the question posed by the Commissioner in the affirmative, stating that Bai Mani was entitled to claim the set-off of assessable profits against the losses suffered by her deceased husband in the partnership. The Court directed the Commissioner to pay the costs of the assessee, thereby concluding the judgment in favor of Bai Mani.
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