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Issues: Whether a partner of an unregistered firm, whose share of loss arises from the firm's business, is entitled to set off that loss against his other business income, and whether the final assessment of the firm bars such set-off.
Analysis: The provision governing set-off of loss against income under different heads does not apply where the loss and the income fall under the same head of business. A partner's share of loss in an unregistered firm is treated as business loss in his hands and may be adjusted against his income from another business under the business head. The second proviso to section 24(1) applies to an unregistered firm claiming set-off, not to an individual partner. The finality of the firm's assessment does not alter the character of the partner's loss for this purpose.
Conclusion: The assessee was not entitled to the claimed set-off under section 24(1), but could not succeed on the reference in view of the proper application of the business-loss adjustment rule; the question referred was answered in the negative, against the assessee.
Ratio Decidendi: A partner's share of loss from an unregistered firm's business can be adjusted only as business loss under the business head, and the restrictive second proviso to section 24(1) does not bar such adjustment when the claim is made by the partner individually.
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