ITAT, DELHI BENCH ‘D’, Scope for setting off of share of loss from a firm against other incomes of a partner

Scope for setting off of share of loss from a firm against other incomes of a partner

The total income of the firm includes within its ambit the total loss of the firm; thus, the assessee-partner is not entitled to set off the share of loss from the firm against his/her other incomes.

ITAT, DELHI BENCH ‘D’, DELHI

Manisha Sharma

v.

ITO

ITA NO. 1443(DEL)/2007

SEPTEMBER 18, 2009

RELEVANT EXTRACTS :

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4.1 We have considered the facts of the case and rival submissions. Clause (2A) of section 10 states that in the case of a person, being a partner of a firm, which is separately assessed as such, his share in the total income of the firm shall not be included in his total income. This clause uses the words “his share in the total income of the firm”. The total income could be a positive figure or a negative figure and, therefore, in our considered view the total income of the firm includes within its ambit the total loss of the firm. Section 75 deals with the losses of the firm and it is provided that any loss in relation to assessment year commencing on or before 1-4-1992, which could not be set off against any other income of the firm and which has been apportioned to a partner of the firm but could not be set off by such partner prior to assessment year commencing on 1-4-1993, then, such loss shall be allowed to be set off against the income of the firm subject to the condition that the partners continued in the said firm. The provision deals with losses prior to assessment year 1993-94. In this case, we are dealing with the losses of assessment year 2003-04. The law regarding assessment of firms was changed with effect from 1-4-1993, consequent to which clause (2A) was inserted in section 10. Therefore, the provision contained in this section does not advance the case of the assessee. Section 78 deals with carry forward and set off of losses in a case of change in constitution of the firm or on its succession. None of these conditions is applicable in this case as the firm was dissolved. The case of Garden Silk Weaving Factory v. CIT, (1991) 189 ITR 512 (S.C.), deals with assessment year 1967-68. In view of change in the law, the ratio of the case is not applicable. Thus, it is held that the assessee is not entitled to set of the share of loss from the firm against her other incomes.



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