Previous-year territorial facts govern income-tax set-off; Burma branch loss was allowable against Bombay profits.

For income-tax computation under the 1922 Act, the relevant territorial and factual position is that existing in the previous year, because tax is charged on the income of that year. On that basis, Burma remained part of British India during the relevant previous year, so the Rangoon branch loss could be adjusted against Bombay profits in computing taxable income for the assessment year 1937-38. The text also notes that this construction aligns with the uniform interpretation adopted for an all-India taxing statute in the absence of conflicting authority.

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Issues: Whether the assessee was entitled to set off the Burma branch loss against the Bombay profits in computing the taxable income for the assessment year 1937-38, although Burma had ceased to be part of British India from 1 April 1937.

Analysis: The reference turned on the scheme of the Income-tax Act, 1922, under which the tax for the assessment year is charged on the actual income of the previous year. Since the relevant previous year ended before the severance of Burma from British India, the facts governing the computation of income had to be ascertained with reference to that previous year and not by reference to the later position during the year of assessment. On that footing, Burma was part of British India during the previous year, so the loss incurred at Rangoon fell within the statutory framework permitting adjustment against profits elsewhere in British India. The answer also accorded with the earlier Full Bench view that, for uniform construction of an all-India taxing statute, the same interpretation should be followed in the absence of conflicting authority.

Conclusion: The assessee was entitled to deduct the Burma loss and the question referred was answered in the affirmative, in favour of the assessee.

Final Conclusion: The computation of taxable income had to be made on the basis of the territorial facts existing in the previous year, and the Burma branch loss was allowable against the Bombay profits.

Ratio Decidendi: For income-tax purposes, the territorial and factual position relevant to computation is that prevailing in the previous year, and a loss incurred in that year is allowable according to the law applicable to that year even if the territorial status changes before the assessment year.

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