Judgement

Appeal (No. 29 of 1935) from a judgment of the High Court (May 1, 1934) upon a reference made by the Income-tax Commissioner under s.66, sub-s.2, of the Indian Income-tax Act, 1922.

The appellant, who carried on business as a money-lender, was also, from 1926-27 until March 31, 1930, a partner in a cotton business, he having a five-eighths share and his partner a three-eighths share in the profits and losses of the partnership. The business was carried on at a loss, and the partner was unable to meet his share of the losses. On April 1, 1930, the debit against him in the partnership books was transferred to the account of the appellants money-lending business, the appellant taking from his partner a promissory note for the sum due. The debt, Rs.36,638, due by the partner was reduced by Rs.500 only, and on March 31, 1931, the appellant wrote off the amount as being irrecoverable in the books of his money-lending business.

The question referred was "Whether the ex-partners share of the loss in the cotton trade which the petitioner [the appellant] had to bear by reason of the ex-partner being unable to meet his share of loss in the partnership business can be set off against