1975 (12) TMI 38 - HC - Income Tax

Summary

Issues:
1. Whether the unabsorbed loss from the assessee's proprietary business should be set off against the share income of the assessee's wife from the firm of M/s. A.L.S. Productions?

Analysis:
The judgment involved a case where the assessee, a sole proprietor of a business, had incurred losses in certain years which were carried forward for consideration in subsequent assessment years. The assessee was also a partner in a firm with his wife, and their share income was allocated for taxation. The dispute arose regarding the set-off of the unabsorbed loss from the proprietary business against the wife's share income. The Income-tax Officer initially rejected the claim, but the Appellate Assistant Commissioner allowed the set-off for the assessment year 1958-59. However, the department appealed against this decision.

The Tribunal held that the share income from the firm, including the wife's share income, could be considered as profits of a business carried on by the assessee. It was determined that the expression "profits" under section 24(2)(ii) referred to profits assessable in the hands of the assessee, not the profits of the partnership. Therefore, the view taken by the Appellate Assistant Commissioner was confirmed, allowing the set-off of the unabsorbed loss against the wife's share income.

The revenue contended that the income of the wife, as per section 16(3)(a)(i), remains the income of the wife and is not converted into the income of the husband for all purposes. Section 24(2)(ii) permits the set-off of losses sustained by the assessee against income earned by the assessee, not the spouse. The Tribunal's interpretation of the provisions was deemed harsh but upheld based on the statutory language.

Citing a previous case, the court emphasized that section 16(3) does not create a legal fiction deeming another's income as the individual's income. The court acknowledged the potential harshness of the provision but concluded that based on the statutory framework, the set-off could not be allowed. The question was answered in the negative, favoring the revenue, and costs were awarded to them.