Business loss set-off within the same head of income allowed despite income exemption for Indian State business

Business income was treated as a single head of income, so profits and losses from all business activities of the assessee had to be computed together. Section 24(1) was held to apply only when a loss under one head is set off against income under another head, not to intra-head adjustments between different businesses. The exemption for income arising in an Indian State did not prevent the related business loss from being taken into account in computing total income, and the proviso to Section 24 could not be used to expand the main provision to deny set-off. The loss from the Bombay business was therefore allowable against Hyderabad business income.

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Issues: Whether loss suffered in a business carried on outside Hyderabad was liable to be set off against income from the assessee's Hyderabad business in computing the taxable business income.

Analysis: The head of income from business was treated as self-contained, and all businesses of the assessee had to be considered together in computing profits and gains under the relevant charging scheme. Section 24(1) was held to apply only where a loss under one head was sought to be adjusted against income under another head, not where profits and losses were being computed within the same head of business. The exemption relating to income arising in an Indian State did not exclude the corresponding business loss from being taken into account in computing total income. The proviso to Section 24 was also held not to enlarge the scope of the main provision so as to deny the set-off.

Conclusion: The Bombay business loss was allowable as a set-off against the Hyderabad business income, and the question was answered in the affirmative in favour of the assessee.

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