Overriding title on partial partition extends to corresponding loss from the same source, allowing set-off in individual assessment.

On a partial partition, where income is diverted at source by an overriding title, the corresponding loss from the same source is also attributable to the beneficiary. The Madras HC noted that the assessee claimed a one-third share in the loss of a firm standing in his father's name after partial partition, while the assessing authority treated the loss as belonging only to the father. The appellate authorities accepted that the loss relatable to the assessee's share could be set off in his individual assessment. The principle applied was that the legal effect of diversion of profit at source extends equally to the matching loss arising from that source, and the assessee was entitled to the share of loss notwithstanding the father's partnership interest.

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Issues: Whether, on a partial partition, the assessee was entitled to claim the share of loss in a firm in which his father was a partner on the basis of overriding title.

Analysis: The claim was that, as a result of the partial partition, the assessee had acquired an overriding title to one-third share of the income from the firms standing in the name of his father. The claim had been rejected by the assessing authority on the footing that the losses belonged to the father, but the appellate authorities held that the loss attributable to the assessee's share could be set off in his individual assessment. The Court applied the principle that where partial partition results in diversion of the profit at source, the same principle governs the corresponding loss arising from the same source.

Conclusion: The assessee was entitled to the share of loss in the firm notwithstanding that his father was a partner.

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