Business income set-off permits partner's share of loss from an unregistered firm against personal business profits.

Under the Income-tax Act, 1922, a partner's share of loss in an unregistered firm could be adjusted against profits from his personal business when the computation remained wholly within the head "business". The restrictions in section 24 governed set-off across different heads of income and did not bar same-head adjustment under section 10. The proviso to section 16(1)(b) and the second proviso to section 24(1) were treated as limiting cross-head set-off only, while earlier authorities supporting intra-head adjustment were followed. The assessee was therefore entitled to set off the partnership loss against personal business profits.

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Issues: Whether an individual assessee could adjust his share of loss in an unregistered partnership business against profits of his personal business in computing income under the head "business".

Analysis: The governing scheme of the Income-tax Act, 1922 distinguished between set-off of losses across different heads under section 24 and adjustment of profits and losses within the same head under section 10. The proviso to section 16(1)(b) and the second proviso to section 24(1) restricted the treatment of losses of an unregistered firm for purposes of set-off against other heads, but they did not exclude a partner's share of loss from being taken into account in computing business income where the adjustment was wholly within the head "business". The earlier authorities recognising such same-head adjustment remained applicable, and the contrary contention that the second proviso operated as an independent bar was rejected.

Conclusion: The assessee was entitled to set off his share of loss in the unregistered partnership against the profits of his personal business; the answer to the reference was in the affirmative.

Ratio Decidendi: Losses and profits under the same head of income are adjusted under section 10, and the restrictions in section 24 apply only to set-off across different heads.

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