Business loss set-off allowed for a discontinued shop's expenses against profits of other ongoing shops.

Business loss from a discontinued third shop was treated as incurred in the relevant accounting year and not as a prior-year loss, because the shop's business continued during the year and ceased only after about two months. Limited turnover did not displace the finding that the business had subsisted, and the book entries supported the timing of the loss. On that basis, the loss on interest, bad debts and other expenses from the third shop fell within the statutory business set-off and could be adjusted against profits of the other two shops in favour of the assessee.

---

---

Issues: Whether the loss on account of interest, bad debts and other expenses relating to the discontinued third shop could be set off against the profits earned by the assessee at the other two shops.

Analysis: The business at the third shop was carried on during the accounting year and was discontinued only after about two months from its commencement. The entries showing limited turnover did not displace the finding that the business had subsisted during that period. The loss was recorded in the books as having been incurred in the accounting year, and there was no basis to treat it as a prior-year loss outside the year of account. In these circumstances, the loss fell within the scope of the statutory set-off applicable to business profits and losses.

Conclusion: The loss from the discontinued third shop was allowable to be set off against the profits of the other two shops, and the answer was in favour of the assessee.

---