TaxTMI 
TaxTMI 
TaxTMI 
2012 (2) TMI 214
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....005-06. 2. Ld. counsel for the appellant submits that the appellant-assessee, who is an individual, had taken over the running business of a partnership firm, in which he was a partner, including fixed assets, current assets and liabilities. It is submitted that the appellant in his return filed in status of an individual was entitled to set off the loss of Rs.22,40,193/- suffered by the partnership firm. This loss should be reduced from the income earned by the appellant as an individual. The appellant relies upon Section 78(2) of the Income Tax Act, 1961 (Act, for short) and decisions of the Supreme Court in CIT vs. Madhukant M. Mehta (2001) 247 ITR 805 (SC) and Saroj Aggarwal vs. CIT (1985) 156 ITR 497 (SC). 3. We have considered....
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....nue. This is not a case of inheritance due to death under the law of succession. The loss suffered by the appellant as an individual can be included and accounted for but not the loss suffered by a different person/unit i.e. the partnership firm. Section 78(2) of the Act does not permit the said set off or diminution. 4. The Madhukant M. Mehta (supra) the sole proprietor had expired and after his death his heirs had succeeded and carried on business in partnership. In this case the losses suffered by the deceased proprietor were allowed to be set off in terms of Section 78(2) of the Act. Section 78(2) carves out an exception in case of succession by inheritance. The general rule is that it is only the person who has suffered the los....
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....s to be assessed in respect of profit and gains from the business for the period up to 18th September, 2004. After the said date and after the partnership firm was dissolved, the sole proprietor has to be assessed in respect of profits and losses. The income earned by the appellant, as an individual, would include his share of loss as an individual but not the losses suffered by the partnership firm. The losses suffered by the partnership firm cannot be set off from the income of the appellant as an individual, in the absence of any specific provision in the Act. The partnership firm and individual are two separate taxable entities or persons under the Act. 7. There is no contradiction between Section 78(2) and Section 170(1). They ....