Ram & Co., the sole proprietorship concern of late Ram, got converted into partnership, after his death on May 10, 2018, by his two sons Luv and Kush. The business of Ram & Co. was continued to be carried in the

Set-off of loss suffered in deceased's business It has been held by the Apex Court in the case of CIT vs. Madhukant M. Mehta [2001] that where legal heirs of a deceased proprietor enters into partnership and carries on the same business in the same premises under the same trade name, there is a succession by inheritance as contemplated in section 78(2) of the Income-tax Act, 1961. The partnership firm so constituted by the sons of late Ram is entitled to carry forward and set off of the deceased's business loss against its income from the subsequent years, because of succession by inheritance. In view of the aforesaid case and provision of section 78(2) in the present case, partners are entitled to set off the losses of ₹ 4.25 lakhs of A.Y. 2018-19 from business income of the firm for the A.Y. 2019-20.