Loss set-off follows the assessee who actually sustained the loss; later business succession does not transfer that right.

Where a business is succeeded only after the close of the accounting year, the right to set off the loss under the loss set-off provision remains with the assessee that actually sustained the loss in that year. The successor companies, having come into existence only later and not having carried on the business during the loss year, could not be treated as having incurred that loss. The succession provision was held not to displace the predecessor's statutory entitlement to set-off in these circumstances, so the loss relief was attributable to the original assessee and not to the later companies.

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Issues: Whether, where an assessment for the relevant year was completed after the business had been succeeded by another person, the assessee who had sustained the loss in the accounting year was entitled to set off that loss under section 24(1), or whether the set-off could be claimed only by the successor under section 26(2).

Analysis: The right created by section 24(1) accrues to the assessee who actually sustained the loss in the accounting year. The assessee in question owned and carried on the loss-making businesses throughout that year, and the successor companies came into existence only later, after the accounting year had ended. As those companies were not in existence during the year in which the loss was incurred, they could not be said to have sustained that loss. Section 26(2) was held to be inapplicable to deprive the predecessor of the statutory right of set-off where the succession occurred after the close of the accounting year and the successor had no profits from the business in that year.

Conclusion: The set-off under section 24(1) was allowable to the assessee who suffered the loss, and not to the succeeding companies.

Ratio Decidendi: The statutory right of set-off belongs to the assessee who sustained the loss in the accounting year, and a later business succession does not transfer or extinguish that right where the successor did not carry on the business during that year.

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