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Issues:
1. Interpretation of Section 24(2)(ii) of the Indian Income-tax Act, 1922 regarding set-off of losses in partnership businesses. Detailed Analysis: The case involved a reference under section 66(1) of the Indian Income-tax Act, 1922, where the assessee, an individual with income from partnership concerns, sought to set off losses from the previous year against his income for the assessment year 1956-57. The dispute arose from the dissolution of a partnership carrying on business in beedi leaves in the previous year, and the continuation of a similar business in partnership with different individuals in the subsequent year. The Income-tax Officer initially rejected the claim, stating that the dissolved firm ceased to exist, and the business carried on by the new partnership was not the same. However, the Income-tax Appellate Tribunal accepted the assessee's contention, emphasizing that both firms were registered and the business activity, i.e., trade in beedi leaves, remained consistent. The specific question referred to the High Court was whether the assessee could set off his share of unabsorbed loss from the dissolved firm against his other business income for the assessment year 1956-57 under section 24(2) of the Act. The crux of the issue lay in the interpretation of section 24(2)(ii), which allows the carry-forward of losses if the same business is continued in the subsequent year. The Commissioner of Income-tax argued that the businesses conducted by the two partnerships were distinct despite dealing in the same commodity, thus failing to meet the continuity requirement of the provision. The High Court analyzed the definition of "Business" under the Act and emphasized that the mode of carrying on business through partnerships did not alter the nature of the business itself. It clarified that the requirement under section 24(2)(ii) was for the same business to be continued by the assessee, not necessarily by the same firm or partnership. As the assessee was engaged in the trade of beedi leaves in both partnerships, the Court concluded that the condition for set-off was satisfied, allowing the assessee to claim the set-off as per his contention. In conclusion, the High Court answered the question in favor of the assessee, highlighting that the continuity of the business activity by the assessee was the key factor in determining the eligibility for setting off losses under section 24(2)(ii). The decision underscored the importance of the nature of the business itself rather than the specific partnership structure through which it was conducted.
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