TaxTMI 
TaxTMI 
1966 (10) TMI 31
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....his loss was, however, apportioned between the partners by the Income-tax Officer, purporting to act under the second proviso to the said sub-section. Similarly, in the next assessment year 1959-60, where there was income from property and loss in ready business as well as speculation business, no tax was imposed, as the loss in ready business exceeded the income from property. The net loss of Rs. 1,239, worked out on the basis of loss in ready business reduced by the income from property, was apportioned between the partners. Further, the speculation loss of Rs. 5,416 was also apportioned between the partners on the same basis as was done in the preceding assessment year 1958-59. In the assessment year 1960-61, there was an income of Rs. 1,014, from property, and a loss of Rs. 21,197, from ready business. In addition, there was a profit of Rs. 6,19,784 in the speculation business. Since this year there was a profit in speculation business, the first proviso to section 24(1) did not apply, and the net income of the respondent was worked out by taking all the three figures into account. The respondent claimed that in the assessment of the respondent's income in this year, the respon....
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....0 and 12 lay down the principles on which the income under these various heads is to be computed. In the case of income from business, profession or vocation, the income has to be computed under section 10(1) of the Act. Section 10(2) of the Act lays down certain deductions which have to be made in computing the profits and gains from business, profession or vocation. It is during this computation to be made by the Income-tax Officer under section 23 of the income from business, profession or vocation in accordance with section 10(1) of the Act that the Income-tax Officer is further required to apply the provisions of section 24. Section 24 is, thus, a provision laying down the manner of computation of total income. The principal clause of section 24(1) lays down that, if there be a loss of profits or gains in any year under any of the heads mentioned in section 6, that loss has to be set off against the income, profits or gains of the assessee under any other head in that year. If this provision had stood by itself without any provisos, the result would have been that all losses incurred by an assessee under any of the heads mentioned in section 6 would be adjusted against profits....
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..... That section lays down different rules for assessment of unregistered firms and registered firms. In the case of an unregistered firm, the total income computed by the Income-tax Officer for determining the tax can be assessed by apportioning that income between the partners, and determining the tax payable by each partner on the basis of such assessment, including his income from other sources, as laid down in section 23(5)(b) of the Act. In the alternative, the Income-tax Officer may choose to assess an unregistered firm as a unit by itself, and, in that case, the tax is determined as payable by the firm as a unit, so that the provisions of section 23(5)(b) are not applied. The second proviso to section 24(1) lays down that in such a case where an unregistered firm is not assessed under the provisions of clause (b) of sub-section (5) of section 23 " any such loss shall be set off only against the income, profits and gains of the firm and not against the income, profits and gains of any of the partners of the firm." It is clear that the expression " any such loss " in this part of the second proviso can only refer to the loss computed for purposes of applying the principal claus....
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....not be set off against other income, profits and gains of the registered firm, has to be apportioned between the partners of the firm, and then he has to give effect to the right of the partners to have the amounts of the loss set off under this section. Once again, if this part of the second proviso were interpreted to include within it the loss in speculative business which is not to be taken into account under the first proviso, the effect of giving a wider meaning to the words " any loss " in it would be that the same loss in speculative business would, after apportionment, be set off against income, profits and gains under other heads in computing the total income of the partners. The result would be that the effect of the first proviso would again be nullified by this part of the second proviso. Consequently, the correct interpretation must be that the words " any loss " in this part of the second proviso also refer to the loss computed for the purposes of the principal clause of section 24(1) taken together with the first proviso, so that it must also exclude the loss in speculative business which is not to be taken into account when computing the total income of the assesse....
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.... and not set off against the income, profits and gains of that earlier year, is only to be set off in a subsequent year, if there are profits in speculative transactions of the same business. This provision is also, however, governed by some provisos, including proviso (c), which lays down that : " Nothing herein contained shall entitle any assessee, being a registered firm, to have carried forward and set off any loss which has been apportioned between the partners, under the proviso to sub-section (1), or entitle any assessee, being a partner in an unregistered firm which has not been assessed under the provisions of clause (b) of sub-section (5) of section 23, to have carried forward and set off against his own income any loss sustained by the firm. " This proviso is again divisible into two parts. One part relates to the case of an unregistered firm and lays down an absolute prohibition against setting off of loss carried forward in the assessment of a partner of an unregistered firm, which has been assessed as a separate unit, by omitting to apply the provisions of clause (b) of sub-section (5) of section 23. This part, thus, does not envisage that, in the case of such an unre....