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TMI Blog1960 (12) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed X X X X Extracts X X X X X X X X Extracts X X X X ..... ul and six appeals were taken to the Tribunal by the three appellants, three for each assessment year. These appeals were disposed of by a common order. The Tribunal held, relying upon the second proviso to section 24(1), that just as loss in an unregistered firm could not be set off against profits from a registered firm under that proviso, the profits in an unregistered firm could not be set off against the loss from a registered firm. It relied upon a decision of the Madras High Court in Commissioner of Income-tax v. Ratanshi Bhavanji, which it purported to follow in preference to a decision of the Punjab High Court in Banka Mal Niranjandas v. Commissioner of Income-tax . The same reasoning was applied to the assessment year 1949-50 and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been absorbed in the profits of the unregistered firm. Inasmuch as we substantially agree with the High Court on the first part of the case, it is not necessary to examine closely of in detail the reasons on which the decision of the High Court proceeds. In our opinion, the matter is simple and can be stated within a narrow compass. Under section 3 of the Income-tax Act, income-tax is chargeable for an assessment year at rate or rates prescribed by an annual Act in respect of the total income of the previous year. Section 14(2)(a), before its amendment in 1956, provided that the tax shall not be payable by an assessee, if a partner of an unregistered firm, in respect of any portion ; of his share in the profits and gains of the firm comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder this section." The Tribunal came to the conclusion that, " . . . just as a partner in an unregistered firm which has suffered loss will not be allowed to set off his share of loss in the unregistered firm against his income from any other source, so it stands to reason that his loss from other sources cannot also be set off against his share income from an unregistered firm." The decision, of the Tribunal was not based upon any specific provision of the Income-tax Act but upon a parity of reasoning by which a specific provision about loss was held to apply the other way round also. The High Court correctly pointed out that all that section 14, sub-section (2), did was to save the profits of an unregistered firm from liability to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The High Court, however, held that once losses were set off against profits, they were to that extent absorbed, and that there was nothing to carry forward. In our opinion, this conclusion does not follow. Section 24 provides for a different situation altogether; it provides for the carrying forward of a loss in business to the subsequent year or years till the loss is absorbed in profits, or till it cannot be carried forward any further. That has little to do with the manner in which the total income of an assessee has to be determined for the purpose of finding out the rate applicable to his income, taxable in the year of assessment. In our opinion, to read the provisions of sections 14(2) and 16(1)(a) in this extended manner would be to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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