Business loss set-off within the business head allowed for computing taxable income under the 1922 Income-tax Act.

Business income under the Income-tax Act, 1922 had to be computed under Section 10 as a self-contained head, and losses from a business carried on in an Indian State were deductible against profits earned in British India. Section 24(1) governed set-off between different heads of income and did not control the internal computation of business profits, while its proviso and Section 14(2)(c) did not change that method. The ruling therefore treated all business profits and losses, wherever arising, as part of the same business-head computation, subject to the statutory allowances, and answered the reference in favour of the assessee.

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Issues: Whether, for computation of taxable income under the head of business, losses from a business carried on in an Indian State could be set off against profits earned in British India under the Income-tax Act, 1922.

Analysis: The relevant scheme of the Act treated business income under Section 6(iv) as computed under Section 10, which governed profits and gains of business as a self-contained head. The set-off provision in Section 24(1) applied to losses under one head against income under another head, and did not govern computation within the business head. The proviso to Section 24(1) and Section 14(2)(c) did not alter the basic method of computing business profits under Section 10. The authorities considered showed that all business profits and losses, wherever earned, had to be brought into the computation under the business head, subject to the specific statutory allowances.

Conclusion: The loss incurred in the Indian State business was deductible against the profits earned in British India for purposes of computing taxable business income, and the answer to the reference was in the affirmative in favour of the assessee.

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