Business continuity, not identical partnership identity, governs carry-forward and set-off of unabsorbed loss under tax law.

Under section 24(2)(ii) of the Indian Income-tax Act, 1922, continuity of the same partnership firm was not required for set-off of an unabsorbed business loss. The material condition was that the assessee continued to carry on the same business in the relevant year, and a partnership was only the mode through which that business was conducted. As the assessee remained engaged in the same trade of beedi-leaf business through a later partnership, the prior loss could be carried forward and set off against that income. The claim was therefore upheld in favour of the assessee.

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Issues: Whether the assessee was entitled under section 24(2)(ii) of the Indian Income-tax Act, 1922 to carry forward and set off the unabsorbed loss from a dissolved partnership against income from a later partnership carrying on the same trade.

Analysis: The relevant condition under section 24(2)(ii) is that the business in which the loss was originally sustained must continue to be carried on by the assessee in the relevant year. The provision does not require continuity of the same firm, concern, or partnership. A partnership is only the mode through which the individual partner carries on the business, and the assessee remained engaged in the same trade, namely business in beedi leaves, in both partnership arrangements. The definition of business under section 2(4) supports the view that the substance of the activity, rather than the identity of the firm, is material.

Conclusion: The assessee was entitled to the set-off claimed, and the question was answered in the affirmative, in favour of the assessee.

Ratio Decidendi: For section 24(2)(ii), continuity of the business by the assessee is sufficient; continuity of the same partnership firm is not required.

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