Partner's share of loss in an unregistered firm can be set off against other income absent firm assessment.

A partner's share of loss in an unregistered firm may be taken into account and set off against other income even if the firm itself has not been assessed. The Income-tax Act treats computation of a firm's income separately from the levy of tax on the firm or its partners, and once business income is computed, losses are deductible in determining total income. The absence of assessment of the unregistered firm does not create a statutory bar to recognising the partner's share of loss, because the Act does not require prior departmental assessment of the firm before that loss is considered in the partner's assessment.

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Issues: Whether a partner's share of loss in an unregistered firm, though the firm was not assessed, can be taken into account and set off against the assessee's income from other sources under the Income-tax Act.

Analysis: The scheme of the Act treats the computation of a firm's income separately from the question of how tax is levied on the firm or its partners. Once business income is computed, losses are deductible in determining the total income, and the mere fact that an unregistered firm has not been assessed does not create a statutory bar to recognising the partner's share of loss. The provisions governing a partner's share of firm income, the assessment of registered and unregistered firms, and set-off of losses do not require that an unregistered firm must first be assessed before its loss can be considered in the partner's assessment. The absence of assessment by the department cannot prejudice the assessee where the Act gives no such discretion.

Conclusion: The partner is entitled to have his share of loss in the unregistered firm taken into account and set off against his other income. The answer is in the affirmative and is in favour of the assessee.

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