Set-off of income under section 64 against loss was allowed under the Income-tax Act, 1961.

Income included under section 64 of the Income-tax Act, 1961 was treated as the assessee's own income, and the Explanation to that provision was read as extending to loss as well. Read with section 14, the amount had to be placed under the appropriate head, and section 71 then permitted set-off against loss under another head. The contrary view based on section 16(3)(a) of the 1922 Act was held inapplicable because the 1961 Act was materially different, and where two interpretations conflicted, the one favourable to the assessee was preferred. The income was therefore liable to be set off against the assessee's loss.

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Issues: Whether income included under section 64 of the Income-tax Act, 1961, could be set off against the assessee's loss for the purpose of taxation.

Analysis: The income brought in under section 64 was treated as income of the assessee and the Explanation to that provision indicated that loss could also fall within its ambit. Read with section 14, such income had to be assessed under the appropriate head, and section 71 permitted set-off against losses from another head. The contrary view based on section 16(3)(a) of the Indian Income-tax Act, 1922 was found inapplicable because the 1961 Act contained materially different provisions. Where two conflicting decisions existed, the interpretation favourable to the assessee was preferred.

Conclusion: The income included under section 64 was liable to be set off against the assessee's loss; the assessee succeeded on the issue.

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