Clubbing provision does not make income the assessee's own for set-off of carried-forward business loss.

Income included in an assessee's total income under the clubbing provision does not become the assessee's own income for all purposes. The Madras HC noted that the wife's share income, though taxable in the husband's hands under section 16(3)(a)(i) of the Indian Income-tax Act, 1922, retained its character as the wife's income. As a result, section 24(2)(ii) allowed carried-forward business loss to be set off only against profits and gains of a business carried on by the assessee himself. The assessee could not use his unabsorbed proprietary business loss against the clubbed share income.

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Issues: Whether the unabsorbed loss from the assessee's proprietary business could be set off against the share income of the assessee's wife from a firm, though that income was included in the assessee's total income under the clubbing provision.

Analysis: The inclusion of the wife's share income in the husband's assessment under section 16(3)(a)(i) of the Indian Income-tax Act, 1922 was held not to convert that income into the husband's own income for all purposes. The income retained its character as the wife's income and was included only for taxation in the husband's hands. Section 24(2)(ii) permits carry forward and set-off only against profits and gains of business, profession or vocation carried on by the assessee, and the loss must be adjusted against income belonging to him. The Court held that the business income of the wife, though clubbed in the husband's assessment, could not be treated as profits of a business wholly carried on by the assessee for the purpose of set-off.

Conclusion: The unabsorbed loss could not be set off against the wife's share income included in the assessee's assessment, and the question was answered against the assessee and in favour of the Revenue.

Final Conclusion: Clubbed income retains its separate character for the limited purpose of taxation, and a brought-forward business loss cannot be set off against such income unless the statutory conditions governing set-off are independently satisfied.

Ratio Decidendi: Income included in an assessee's total income under the clubbing provision does not thereby become the assessee's own income for all purposes, and set-off of carried-forward business loss is confined to profits and gains of business carried on by the assessee himself.

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