1934 (5) TMI 19 - HC - Income Tax

Summary

Issues:
1. Whether the ex-partner's share of loss in a partnership business can be set off against the petitioner's other income as a loss of profits or gains under Section 24 of the Act.

Analysis:
The petitioner, who owned a money lending business and was a capitalist partner in a cotton business with another partner, sought to set off the loss incurred due to the ex-partner's inability to meet his share of the partnership losses against his other income. The ex-partner became a debtor to the cotton business, and as he was unable to pay, the petitioner had to bear the loss. The petitioner claimed that by taking over the ex-partner's indebtedness, he should be allowed to set off the loss against his profits. However, the Income Tax authorities rejected this claim. The court emphasized that losses from one business can be set off against profits from another business in the same year, but in this case, there was no evidence to show that the loss incurred was the petitioner's loss. The court ruled that the ex-partner's indebtedness did not constitute a bad debt owed to the petitioner's money lending business, as the money was not lent directly to the ex-partner. Therefore, the claim for setting off the loss against profits was denied.

Conclusion:
The court held that the petitioner could not set off the loss incurred in the cotton business against the profits of his money lending business, as the ex-partner's indebtedness did not qualify as a bad debt owed to the money lending business. The claim for setting off the loss was rejected, and the costs were awarded to the Commissioner of Income Tax.