TMI Blog1997 (1) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... Co., Jammu, and Jagdish Ram Sud and Co., in which he was a partner. The petitioner was also a partner in a third partnership firm, Kishan Chand and Company. All the three firms in which the petitioner happened to be a partner carried on the business of the exploitation of specified forests and extraction of resin. However, the business of plying of trucks was also carried on in the third firm, Kishan Chand and Company. There were ten partners in the firm, Sham Lal Guran Diwaya and Company, under the partnership deed dated May 6, 1974. There were eight partners in the second firm, Jagdish Ram and Co., under the partnership deed dated October 28, 1975. The petitioner incurred a loss of Rs. 4,680 in the firm, Sham Lal Guran Diwaya and Co., Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uation of business, the assessee was not entitled to claim set off of the losses of the two firms in terms of section 72 of the Act. Unabsorbed carried forward loss can be set off against the future profits of any business carried on by the assessee provided the business, in which the loss was computed, continued to be carried on by the assessee in the next year. Merely because the petitioner was a common partner in the three firms, that will not make him entitled to claim set off of the unabsorbed losses of the other two firms which had discontinued the business. There is no dispute about the fact that the petitioner happened to be a partner in the three firms during the assessment year 1976-77. He, however, continued to be a partner in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had derived income from other sources in the subsequent period and, therefore, the assessee was entitled to claim set off of the losses. The balance-sheet of the assessee showed that, even after the assessee had dropped its banking business, it maintained its capital with its assets, made realisations and discharged its liabilities, retained its staff and continued to incur legal expenses in connection with its business. It would be, thus, clear from the view taken in the aforesaid case that, if any part of the business is discontinued, the assessee is entitled to claim set off of the unabsorbed losses of the earlier year incurred in the discontinued business against the profit earned from the remaining business. In CIT v. A. Dharma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the plea of the assessee that the conditions of section 72 of the Act had been fulfilled by him, carries much force. In Standard Refinery and Distillery Ltd. v. CIT [1971] 79 ITR 9 (SC), it has been held by the Supreme Court that, for allowing set off of the carried forward losses, it must be seen whether two lines of business constitute the "same business" within the meaning of section 24(2) of the Indian Income-tax Act, 1922. It was held that the income-tax authorities must consider the interconnection, interlacing, interdependence and unity furnished by the existence of common management, common business organisation, common administration, common fund and a common place of business. The question of set off of the unabsorbed los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common manager and co-ordination in management between the two firms, since the same business was in existence, the share of loss in the dissolved firm was allowed to be carried forward and set off against the share of profits in the other firm for the subsequent year. In CIT v. S. S. M. Ahmed Hussain [1987] 164 ITR 525, the Madras High Court has also examined the case of an assessee regarding carry forward and set off of loss in the light of the principles laid down by the Supreme Court. The test of interconnection, interlacing or interdependence and unity was examined and it was held that loss in one line of business could be set off against the profits earned in the business carried on in a future year. It was noticed that there was a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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