Business income set-off and reference jurisdiction: partner's loss may be adjusted, and the correct legal question may be raised on stated facts.

A partner's share loss from one firm can be set off against share income from other firms under the common business head where the statutory scheme treats the partner's business income and loss as part of total income, and the proviso to section 24(1) operates only as a limited exception. The Jaipur partnership was not treated as a separate assessment unit to defeat the adjustment. The text also states that the Tribunal and High Court may consider the correct question of law arising on the facts found, even if the question was not framed in that exact form earlier, and that the Tribunal must state the case fairly and fully.

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Issues: (i) Whether the assessee's share loss from a firm in Jaipur, earned outside British India, could be set off against his share income from firms in British India under the head "business". (ii) Whether the Appellate Tribunal and the High Court could deal with the question of law arising on the facts even if the assessee had relied on a wrong form of the question before the Tribunal.

Issue (i): Whether the assessee's share loss from a firm in Jaipur, earned outside British India, could be set off against his share income from firms in British India under the head "business".

Analysis: The assessee's share income and share loss from different partnerships were treated as income under the common head of business. The statutory scheme required the total income of a resident to include income accruing both within and without British India, subject to the relevant exemptions. The proviso to Section 24(1) was held to be only an exception to the general rule of set-off and did not bar adjustment of a partner's loss from one business against profits of another business in the hands of the partner. The Jaipur firm was not treated as a separate unit of assessment so as to prevent the partner from claiming the adjustment.

Conclusion: The assessee was entitled to set off the Jaipur share loss against his share income from the firms in British India, and the answer on this issue was in the affirmative, in favour of the assessee.

Issue (ii): Whether the Appellate Tribunal and the High Court could deal with the question of law arising on the facts even if the assessee had relied on a wrong form of the question before the Tribunal.

Analysis: A litigant is entitled to have the correct question of law applied to the facts found by the Tribunal. The Tribunal is bound to apply the appropriate law to the facts found by it, and the High Court's jurisdiction under Section 66 extends to questions of law arising from the order on the facts stated, even if the precise form was not adopted earlier. The Tribunal was also required to state the case fairly and fully, without colouring the statement by its own opinion.

Conclusion: The Court held that it had jurisdiction to require the Tribunal to state the correct question arising on the facts and that the Tribunal could not refuse reference on the ground that the assessee had not framed the question in that form.

Final Conclusion: The reference was answered in favour of the assessee, and the loss from the Jaipur partnership was held admissible for set-off against the assessee's business income from British India.

Ratio Decidendi: A partner's share loss from one business may be set off against the partner's business income under the statutory scheme of total income and set-off, and the proviso governing unregistered firms is confined to the exception it expressly creates.

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