Set-off of unregistered firm losses by an individual partner is barred where the statutory proviso applies.

Section 24(1) of the Indian Income-tax Act, 1922 gives a general right of set-off, but its second proviso creates an exception where the assessee is an unregistered firm not assessed under section 23(5)(b). The text explains that an individual partner cannot treat himself and the firm as the same assessee to bypass that exception, because the firm and partner are distinct capacities for tax purposes. Where the firm's loss has already been assessed in the hands of the unregistered firm, the partner's attempt to set off his share of that loss against personal income is barred. The claim was therefore disallowed in favour of the Revenue.

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Issues: Whether an assessee, being an individual partner of an unregistered firm, could set off his share of the firm's loss against his income from other heads notwithstanding the second proviso to section 24(1) of the Indian Income-tax Act, 1922.

Analysis: The opening words of section 24(1) confer a general right of set-off, but the second proviso carves out an exception where the assessee is an unregistered firm that has not been assessed under section 23(5)(b). The expression must be read with the main provision, and the statutory exception cannot be neutralised by treating the individual partner and the firm as the same assessee. The loss had already been assessed in the hands of the unregistered firm, and the attempted set-off would amount to crossing distinct capacities and entities. The proviso was therefore applicable and barred the partner from claiming the set-off against his personal income.

Conclusion: The claim to set off the partner's share of loss was rightly disallowed, and the question was answered in the affirmative, in favour of the Revenue.

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