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TMI Blog1932 (1) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. 2. The facts with regard to this matter can be shortly stated. The petitioners constitute a Hindu undivided family and carry on a money-lending business at Ootacamund. Up to 24th May, 1929, they also owned a half share in a firm styled K.G.S. Co. and a 2-5ths share in a firm styled B.K.S. Co. doing other classes of business in Ootacamund. These two firms were dissolved on 24th May, 1929, an account was taken of their assets and liabilities and those assets and liabilities, when ascertained, were distributed between the petitioners and another partner named B.K. Sunchai Gounder. The total of the liabilities falling to the share of the petitioner family was ₹ 55,584. On this liability of ₹ 55,584 which represented b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ayyar proceeded to a great extent on the consideration of the question as to whether, when an assessee is carrying on more businesses than one and in respect of one of them he has to borrow capital and pay interest thereon and in respect of that business in the year of accounts a loss results, such interest paid in respect of that borrowed capital can or cannot be set off against the profits made by the assessee in some other business. We were referred to decisions of this Court in support of that argument. 3. It was not contended by Mr. Doraiswamy Iyer that any such deduction, which of course would be one under Section 10(2)(3), Income Tax Act, could be made directly from the profits and gains of the other business; but his contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm, he is under Section 10(2), Income Tax Act, XI of 1922, entitled to set off, for purposes of Income Tax, the loss incurred by him in respect of the partnership trade against the profit made by him in his individual trade. The view taken in that case by Sir Walter Schwabe, C.J., was that the loss made in the one trade could not be set off against the profit made in the other under Section 24 because in his view that only enabled a loss in one class of business to be set off against the loss in another class of business. That we think is an incorrect view to take of that section; and the later decision of this High Court in Commissioner of Income Tax v. Suppan Chettiar 123 Ind. Cas. 801 : A.I.R. 1930 Mad. 124 : 53 M. 702 : 31 L.W. 141 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that some assets fell to the share of the petitioner family and also of the liabilities, the liabilities in respect of which interest amounting to ₹ 6,867 had to be paid and in respect of which this deduction is claimed in this case. The argument on behalf of the assessees has proceeded on footing that this is to be dealt with as a trading loss and that, if it is to be considered as a trading loss, the interest can be deducted from the profits, if any, of these businesses under Section 10(2)(3) and the loss resulting from such deduction can then be deducted from the profits made by the undivided family; but it seems to me to be quite clear that we are here dealing with capital loss as opposed to trading loss. Section 24 speaks of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eably among all the shareholders as capital, and was not to be devoted as prints in the payment of a cumulative preferential dividend. These cases are of assistance to us in this case. It seems to me that what really was done in this case was to make a distribution of the property of the two businesses and that it was not open to the assessees to say upon such a distribution that some part of it represented trading profits and some part of it trading losses. It was in fact capital and, had there been any profit to the assessee on that distribution, it could not have been, it is conceded by Mr. Patanjali Sastri, liable to payment of income tax. It follows, therefore, that what the distribution results in a loss no deduction in respect of tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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