COMMISSIONER OJ!' INCOME-TAX, ANDHRA PRADESH, HYDERABAD versus A. DHARMA REDDY, MORTHAD

Citation: [1969] 3 S.C.R. 782 · Decided: 19-02-1969 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

COMMISSIONER OJ!' INCOME-TAX, ANDHRA PRADESH, 
A 
HYDERABAD 
• 
v. 
A. DHARMA REDDY, MORTHAD 
February 19, 1969 
(J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.] 
Income-tax Act (11 of 1922). s. 24(2)(ii) as amended in 1955-
Loss sustained by a partner in a dissolved firm, if can be set ofi against 
profit earned in anuther firm in the subsequent year. 
The assessee carried on two businesses in Didi leaves as partner in 
B 
two different firms. 
The first firm consisted of two partners, and the 
C 
second of four; both these firms were assessed to income tax separately 
and it was admitted that the two finns had nothing to do with each other. 
The first firm sustained losses and was dissolved. 
The assessee claimed 
that the losses sustained by him in the previous year (sustained in the 
first firm) should be carried forward and set off against his profit in the 
subsequent year (earned in the second firm) under s. 24 (2) (ii) of the 
Income-tax Ac~ !922 as the assessee carried on the business in Bidi 
leaves durin11 that year. 
The Income-tax Officer rejected the claim, and 
D 
his order was upheld by the Appellate Assistant Commissioner. 
But the 
Appellate Tribunal accepted the claim and the question was answered by 
the High Court in the assessee'a favour. 
The Revenue appealed to this 
Court and contended that for gettillll the benefit under s. 24(2)(ii) the 
same concern or partnership which carried on in the previous year would 
continue to function in the year of assessment. 
HELD : The appeal must be dismissed. 
E 
In order to &Ct the benefit of a. 24(2) (ii) of the Act especially after 
the amendment made by the Finance Act 1955 it was not necessary that 
the assessee should carry on the same business in the year of assessment. 
The change in the language of the provision substituted by the Amending 
Act was significant and all that the assessee had to show was that the 
business in which Joss was originally sustained continued to be carried on 
by him in the assessment year. 
F 
If the first partnership wa• dissolved it did not mean that his business 
i• Bidi leaves came to an end so long •• he continued to dp that business 
either individually or in partnership with -others. 
During the assessment 
year in question he was carryina on that business in partnership with 
three others. According to the provisions of s. 24(2) as they stood be-
fore the amendment made by the Finance Act of 1955 he continued to 
carry on the same business but for the purpose of the present case s. 
G 
24(2) (ii) as it stood after the amendment was relevant and on the plain 
language Of the aforesaid provision the _business in which the loss was 
originally sustained was continued during the assessment year. The word 
"business" bas been defined in s. 2( 4) of the Act as including any trade, 
commerce or manufacture or any adventure or concern in the nature of 
trade, commerce or manufacture. 
These words are of wide import the 
underlying idea being of continuous exercise of an activity. 
In the pre-
sent case, the business did not depend on the constitution of a partnership 
}l 
firm through which it was carried on nor could it come to an end so long 
as the a,sseuec carried on the aame ryatematic or or1,.'l.niled coune of 
activity with a set purpose. [786 G--787 CJ 
A 
c 
0 
E 
F 
G 
H 
C.I.T. v. DHARMA REDDY (Grover, J.) 
78 3 
When the profits of a registered firm are ascertained, the as..,ssee for 
the purpose of paying tax is not the registered firm but each partner .of 
that firm. 
The Identity of the business for the purpose of s. 24(2) (u) 
does not change by reason of the change in persons who carry on that 
business since it continues to be carried on by the same individual. 
A 
set off for loss which had been carried forward from the earlier years 
under the provisions of s. 24 would only be available to the individual 
partner who had suffered the loss and not to the other partners of the 
firm or the firm. (787 FJ 
Narain Swadeshi Weaving Mills v. Comn1issioner of Excess Profits Tax, 
(1954] 26 I.T.R. 765, 773, Dwarkadas Lee/adhar 
v. 
Commissioner of 
Jncome .. tax,' Kerala, 47 l.T.R. 619, S. Narain Singh v. Cpmmissioner of 
Income-tax, Delhi, 66 I.T.R. 341 and Sitaram Motirani JGin v. Commis-
sioner of Income-tax, 43 I.T.R. 405, referred to. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1057 of 
1966. 
Appeal from the judgment and order dated April 17, 1964 of 
the Andhra Pradesh High Court in Case Referred N

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