Clubbed minor partnership income can be set off against brought-forward firm losses when computing the assessee's taxable income.

Income clubbed under section 64(ii) from a minor child's partnership share may be reduced by the child's brought-forward loss from the same firm for carry forward and set-off purposes. Applying the principles in J. H. Gotla and the court's prior ruling in Abhay L. Khatau, the profit or loss from the minor's business interest was treated as the assessee's own only for this limited adjustment. On that basis, the carried-forward loss could be set off against the clubbed share income, and the assessee's position was accepted.

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Issues: Whether, while computing the income of a minor child from a share in a firm included in the assessee's income under section 64(ii), the minor's share can be reduced by carry forward and set-off of the minor's loss from the firm in the preceding assessment year.

Analysis: The issue was treated as concluded by the earlier Supreme Court ruling in J. H. Gotla and by the Court's own prior decision in Abhay L. Khatau. The governing principle applied was that, where income of a wife or minor child from a partnership is clubbed with the assessee's income, the corresponding profit or loss from that business is to be treated as the assessee's profit or loss for the purpose of carry forward and set-off of loss. On that basis, the minor's brought-forward loss from the firm could be adjusted against the minor's share income included in the assessee's assessment.

Conclusion: The question was answered in the affirmative and in favour of the assessee.

Final Conclusion: The assessable share income of the minor child could be reduced by the carried-forward loss from the firm, and the revenue's reference failed.

Ratio Decidendi: Income clubbed under section 64(ii) must be matched with the corresponding business loss for carry forward and set-off purposes, so that the profit or loss of the wife or minor child is treated as the assessee's own for that limited purpose.

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