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TMI Blog1966 (10) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... ether, having regard to clause (e) of the proviso to section 24(2), the assessee, an unregistered firm, was entitled to carry forward the whole of the loss including the share of the loss of the two retiring partners ?" The question of law arising for decision in this case, we were told, is not covered by any decision either of the Supreme Court or any of the High Courts. The assessee is an unregistered firm by name "The Bharat Engineering and Construction Company, Udipi". It carries on business as engineering contractors. The firm in question was constituted as per the partnership deed dated 25th September, 1950. During the assessment years 1956-57, 1957-58 and 1958-69, it incurred losses. The losses so incurred amounted to Rs. 1,41,18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Officer observed : " Since the unabsorbed loss of Rs. 1,41,168 (correct figure is Rs. 1,41,180) has to be carried forward and set off, there will be no taxable income for 1959-60. During the year of account, there was a change in the constitution of the firm in that two of the partners, Sri U. Srinivasa Rao and Rosario Mathew Andrade, were released on April 3, 1958, and April 4, 1958. Therefore, the share of profits of each partner will be computed proportionately in accordance with the proviso to section 26(1) for the purpose of setting off the unabsorbed loss of previous years under section 24(2). In accordance with clause (e) of the proviso to section 24(2), so much of the loss proportionate to the share of the retired partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 24(2), which provides that, where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March, 1940, in any business, profession or vocation and the loss cannot be wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year. But, that right is subject to the provisions contained in the proviso. We are not now concerned with clauses (i) to (iii) of section 24(2). Nor are we concerned with any of the clauses in the proviso, excepting clauses (c) and (e). Clause (c) to the extent materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (1) of section 16 is referred to in the above clause only for the purpose of computation of the share of loss of the partners who have retired and for no other purpose. Clause (b) of sub-section (1) of section 16 says : " In computing the total income of an assessee, when the assessee is a partner of a firm, then, whether the firm has made a profit or a loss, his share (whether a net profit or a net loss) shall be taken to be any salary, interest, commission or other remuneration payable to him by the firm in respect of the previous year increased or decreased respectively by his share in the balance of the profit or loss of the firm after the deduction of any interest, salary, commission or other remuneration payable to any partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istered, in the constitution of which there has been a change, clause (c) deals with the questions of set-off of loss by a registered firm when its loss had been apportioned between its partners under the proviso to section 24(1) as well as the set-off by the partners of an unregistered firm which has not been assessed under the provisions of clause (b) of sub-section (5) of section 23 against their own income of any loss sustained by the firm. The two clauses are independent of one another. One has nothing to do with the other. Hence, the view taken by the Tribunal appears to us to be wrong. In our opinion, as mentioned earlier, the case before us is entirely governed by clause (e). The fact that, in the case of an unregistered firm, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, it is intended to include both registered as well as unregistered firms. In section 24(2) itself we find the words " firm ", " registered firm " and " unregistered firm. " To accept the contention of Mr. Bhat is to ignore one of the well-accepted canons of construction. Even otherwise, from the language of the provision, it is clear that the expression " firm " found in clause (e) includes both registered and unregistered firms. We think the following passage in The Law and Practice of Income-tax by Kanga and Palkhivala (fourth edition, at page 607) correctly sets out the legal position : " The broad principle underlying sub-section (2) is that the right of carry-forward and set-off of losses is available only to the person who has s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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