Registered firm loss carry-forward is barred under section 75; unabsorbed loss must be allocated to partners for set-off.

Section 75 of the Income-tax Act, 1961 was read as restricting a registered firm's loss relief: the firm may set off its loss against income of the same year, but where the loss remains unabsorbed it must be apportioned among the partners. The partners, not the firm, are then entitled to set off and carry forward that loss under the relevant provisions on intra-head and inter-year loss adjustment. On that construction, the registered firm is excluded from carrying forward its own unabsorbed loss to subsequent years, and the contrary view taken in earlier Madras High Court decisions was declined because of the clear wording of section 75.

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Issues: Whether a registered firm can carry forward unabsorbed loss to subsequent years and whether such loss must instead be apportioned among the partners for set-off under the relevant provisions of the Income-tax Act, 1961.

Analysis: Section 75 of the Income-tax Act, 1961 was treated as the controlling provision. Its language was read as making a registered firm's right to claim loss relief restrictive: where the firm's loss cannot be set off against its other income, the loss is to be apportioned between the partners, who alone are entitled to set it off and carry it forward under sections 70, 71, 72, 73, 74 and 74A. On that construction, the firm itself is excluded from carrying forward its own unabsorbed loss. The contrary view taken in the Madras High Court decisions was declined in view of the clear wording of section 75.

Conclusion: A registered firm can set off its loss against income of the same year but cannot carry forward the unabsorbed loss to subsequent years; the issue is answered in favour of the Revenue.

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