Circular No. 20 of 1944 is withdrawn with immediate effect. - Income Tax - 405/CBDT

INSTRUCTION NO. 405/CBDT Dated: April 6, 1972 Section(s) Referred: 64(1) ,71 ,72 , 16(3) of 1922 Act , 24(1) and (2) of 1922 Act Statute: Income - Tax Act, 1961 Reference is invited to Board's Circular No. 20 dated 15th July, 1944 (C. No. 4(13)-IT/44) on the above subject. It was stated in the above circular that where the wife or minor child of an individual incurs a loss, which if it were income would be includible in the income of that individual u/s. 16(3) of the I.T. Act, 1922 such loss should be set-off against the income of the individual u/s. 24(1), and if not wholly set-off should be carried forward u/s. 24(2). 2. The Gujarat High Court has held in the case of Dayalbhai Madhavji Vadera [(1956)66 ITR 551] that if the share of the wife in the firm in which the assessee is a partner is a loss such loss is not to be considered in the assessment of the assessee u/s. 16(3) of the I.T. Act 1922/Section 64(1) of the I.T. Act, 1961. As this decision of the Gujarat High Court is contrary to the Board's instructions contained in Circular No. 20 of 1944 quoted above, the Board has reconsidered the matter and decided that the above decision of the Gujarat High Court may be followed. 3. Accordingly, Circular No. 20 of 1944 is withdrawn with immediate effect. 4. The above instructions may please be brought to the notice of the assessing officers working in the Charge without delay.