Set-off of unregistered firm losses against a partner's profits barred where the firm's loss was not assessed under the Act.

Section 24 of the Income-tax Act, 1922 allows set-off of loss against income under other heads, but the second proviso restricts an unregistered firm's loss, where the firm was not assessed under section 23(5)(b), to set-off only against the firm's own income, profits and gains. Applying the Supreme Court ruling in Jadavji Narsidas & Co., the partner could not claim the firm's loss against personal profits. The assessee was therefore not entitled to the set-off claimed, and the issue was answered in favour of the Revenue.

---

---

Issues: Whether the assessee, being a partner in an unregistered firm whose loss was not assessed under the Act, could claim set-off of its share of the firm's loss against its own profits for the assessment year 1957-58.

Analysis: Section 24 of the Income-tax Act, 1922 permits set-off of loss against income under other heads, but the second proviso limits a loss of an unregistered firm that has not been assessed under section 23(5)(b) to being set off only against the income, profits and gains of the firm itself. The claim was therefore governed by the statutory bar, and the contrary Bombay view could not prevail in the face of the Supreme Court ruling in Jadavji Narsidas & Co., which held that such a loss cannot be set off against the income of the partners.

Conclusion: The assessee was not entitled to claim set-off of the loss of Rs. 8,814 against its own profits. The question was answered in favour of the Revenue and against the assessee.

---