COMMISSIONER OF INCOME TAX Vs. B VIJAYALAKSHMI

JUDGEMENT

(1.) AT the instance of the Department in the case of three assessees who are partners in the same firm, the Tribunal referred the following question of law, relating to the assessment year 1978-79, under section 256(1) of the Income-tax Act, 1961, for the opinion of this court :

(2.) THE assessees were partners in a firm by name Sree Abirami Cotton Mills. This firm had been incurring losses year after year right from its inception. THE firm was sold as a going concern in the course of the year 1978-79. THE assessees had certain carried forward losses and unabsorbed depreciation relating to this firm. THE assessee claimed that this carried forward business loss and unabsorbed depreciation should be set off against his or her income for 1979-80, the year under consideration. THE Income-tax Officer negatived the assessee's claim on the ground that as the business of Sree Abirami Cotton Mills in which the loss was incurred had been closed, the carried forward loss relating to it cannot be set off. THE assessee preferred an appeal before the Appellate Assistant Commissioner and contended that the assessees are partners in a number of firms, and the business of all these firms forms but one business and so long as one of these businesses exists, the carried forward loss of a defunct firm should be allowed to be set off against other business income of all the partners.