Same business principle allows carry-forward of losses despite change from individual trading to partnership profits.

Losses from earlier years could be carried forward and set off where the later profits arose from the same business activity. The controlling test under section 24(2) of the Indian Income-tax Act, 1922 was whether the earlier individual liquor contracts and the later partnership liquor contract constituted the same business. The court treated the change from carrying on the activity individually to earning profits through a registered firm as immaterial, because the nature of the business remained liquor contracting. The distinction between assessment of a partner in a registered firm and in an unregistered firm affected tax computation and collection, but not business identity. The earlier losses were therefore available for set-off against the assessee's share of firm income.

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Issues: Whether losses incurred by an assessee in his individual capacity in earlier assessment years could be carried forward and set off against his share of profits from a registered firm in a later assessment year where the business activity remained liquor contracts.

Analysis: The relevant law was section 24(2) of the Indian Income-tax Act, 1922, under which loss could be carried forward and set off against profits of the same business, profession or vocation. The controlling question was whether the earlier individual liquor contracts and the later partnership liquor contract represented the same business. The fact that the later profits arose through a registered firm did not change the nature of the underlying business, because the activity throughout was liquor contracting. The distinction between a partner's assessment in a registered firm and an unregistered firm affected computation and collection of tax, but did not alter the business identity for section 24(2). The Court treated the change from individual name to partnership as immaterial on the facts, and applied the principle that the nature of the business, not the manner of obtaining contracts, determines sameness of business.

Conclusion: The assessee was entitled to carry forward and set off the earlier losses against his share of income from the registered firm.

Ratio Decidendi: For the purpose of section 24(2) of the Indian Income-tax Act, 1922, a business remains the same where the nature of the activity is unchanged, and the mere fact that profits in the later year arise through a registered partnership instead of the assessee acting individually does not destroy the identity of the business.

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