Member's share from an association is taxable income, and carried-forward business loss is limited to the same business.

A member's share of income from an association of persons remains taxable as income in the recipient's hands even where the association has already been separately assessed, because prior taxation at the association level affects only the quantum received and not the character of the receipt. A carried-forward business loss under section 24(2) is confined to set-off against the profits and gains of the same business, profession or vocation in which it arose; it cannot be adjusted against income from a distinct business carried on by the same assessee. The reference was answered partly for the Revenue, with the first issue decided in the affirmative and the second in the negative.

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Issues: (i) Whether a shareholder's or member's share of income from an association of persons separately assessed to tax is income falling under one of the heads in section 6 of the Income-tax Act, 1922. (ii) Whether a loss carried forward under section 24(2) can be set off against income from another business of the assessee or only against profits of the same business.

Issue (i): Whether a shareholder's or member's share of income from an association of persons separately assessed to tax is income falling under one of the heads in section 6 of the Income-tax Act, 1922.

Analysis: The share received by a member from an association of persons remains income in the hands of the recipient, even if the association has been separately assessed. The fact that tax has been levied at the level of the association affects only the amount received and not the character of the receipt. The receipt is a recurring revenue receipt and falls within the concept of income for the purposes of the Act.

Conclusion: Yes. The assessee's share in the income of the association of persons is income falling within section 6 of the Income-tax Act, 1922.

Issue (ii): Whether a loss carried forward under section 24(2) can be set off against income from another business of the assessee or only against profits of the same business.

Analysis: Section 24(2) permits the unabsorbed business loss to be carried forward and set off only against the profits and gains of the same business, profession or vocation. The controlling expression is "same", which limits the allowance to the identical business in which the loss arose. A different business, even if carried on by the same assessee, cannot be treated as the same business for this purpose.

Conclusion: The carried-forward loss could be set off only against the profits of the same business in which it arose, and not against the assessee's income from another business.

Final Conclusion: The reference was answered partly in favour of the Revenue, with the first question answered in the affirmative and the second in the negative.

Ratio Decidendi: A loss carried forward under section 24(2) of the Income-tax Act, 1922 is confined to set-off against the profits of the same business and cannot be adjusted against income from a distinct business carried on by the same assessee.

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