The assessee is entitled to set off losses incurred in one business against profits earned in another business under S. 10 of the Indian Income-tax Act, 1922.

Judgment

S. K. DAS, J. : These two consolidated appeals raise a common question of law and have been heard together. The Commissioner of Income-tax, Madras, is the appellant in both the appeals. P. M. Muthuraman Chettiar, manager of a Hindu undivided family, is the respondent in Civil Appeal No. 429 of 1960 and S. Abdul Shakoor is the respondent in Civil Appeal No. 430 ) of 1960. We shall refer to the respondent in each of these two appeals as the assessee.

2. The short facts giving rise to the two appeals are these. The assessee in Civil Appeal No. 429 of 1960 is a Hindu undivided family consisting of a father and his minor son. The assessee carried on business as a money lender and a dealer in shares in what was then known as British India. The assessee was also a partner in three non-resident firms carrying on business at Penang, Kuantan and Raub. By reason of the residence of the manager in the year of assessment which was 1964-47, the assessee was treated as resident and ordinarily resident in the taxable territories. In the course of the assessment proceedings, the assessee claimed that it had incurred a loss of Rs. 23,672 in the three foreign businesses in which it was a partner, and it claimed a set off of this sum against its income from the money lending business within the taxable territories. The income-tax authorities negatived the claim and this order was confirmed by the Appellate Assistant Commissioner and by the Tribunal. The reasoning on which the claim was disallowed by the Tribunal was this: the Tribunal said that when an assessee carried on more businesses than one and sustained loss in one of them. the same could be set off against the income from other business under S. 10 of the Indian Income-tax Act 1922. but that principle was not applicable where the business carried on by the assessee was in partnership with others. The Tribunal expressed the view that in such a case S. 10 of the Indian Income-tax Act would not apply and the right to set off would arise only under S. 24 and as none of the sub-sections of that section were attracted to the case, the assessee was not entitled to the relief claimed.

3. In compliance with the requisition of the High Court of Madras under S. 66(2) of the Income-tax Act, the Tribunal stated a case in respect of the following question of law which arose out of its order :

"Whether the loss of Rs. 23,672 incurred the assessee as a partner of the three firms outside India can be set off against the assessee s income from business in India having regard to the provisions of the Indian Income-tax Act in this behalf ?"

This question was answered by the High Court in favour of the assessee.

4. In Civil Appeal No. 430 of 1960 the assessee, who was resident and ordinarily resident in the taxable territories, carried on a business in the manufacture and sale of lungies at Madras. In or about April 1946 a similar business was started at Rangoon in Burma in which the assessee became a partner along with two other persons. the assessee s share being 9/16 only. The assessee was the capitalist partner, while the other two were working partners in-charge of the management of the business. The Rangoon firm suffered a loss and as no accounts were said to have been maintained, a statement of affairs as on December 31, 1946 of the Rangoon firm was taken and this showed a loss of Rs. 43,969. The partnership was later dissolved and a registered deed of dissolution of the firm was executed on January 13, 1947, under which the assessee agreed to bear the whole loss of Rs. 43,969 as the other partners were unable to contribute their share of the loss and also to take over the assets and liabilities of the Rangoon firm as on December 31 1946. In the books maintained by the assessee at Madras for the period ending March 31, 1847, the sum of Rs. 43,969 was adjusted to the capital account of the assessee and in the return of the total income filed for the assessment year 1947-48, the assessee claimed tha