Limited dividend tax concession allows business loss set-off because income remains within total income computation.

Paragraph 12 of the Part B States (Taxation Concessions) Order, 1950 granted only a limited concession on dividend income from companies registered in Part B States; it did not remove that dividend from the assessee's total income. Because the dividend remained within the tax net to the extent specified, business loss could be adjusted against it under section 24(1) of the Indian Income-tax Act, 1922. The unabsorbed balance alone would be carried forward. The reference was answered against the assessee and in favour of the Revenue.

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Issues: Whether dividend income from companies registered in Part B States was exempt from tax under paragraph 12 of the Part B States (Taxation Concessions) Order, 1950, and whether business loss could be set off against that dividend income under section 24(1) of the Indian Income-tax Act, 1922.

Analysis: Paragraph 12 did not grant a total exemption from tax. It applied only where the assessee's total income included dividend income from the specified companies, and it gave a limited relief by making no income-tax payable on the specified proportion of such dividend. The dividend income therefore remained part of the total income and was taxable to the extent stated in the Order. Set-off under section 24(1) is concerned with taxable income, and the computation of loss and profits under the Act requires adjustment of losses against taxable receipts in determining the net result. Since the dividend income was not outside the tax net, the business loss could be adjusted against it, and the balance loss alone would be carried forward under section 24.

Conclusion: The business loss was rightly set off against the dividend income from companies registered in Part B States. The answer to the reference was against the assessee and in favour of the Revenue.

Final Conclusion: Paragraph 12 of the Part B States (Taxation Concessions) Order, 1950, provided only a limited tax concession and did not exclude the dividend from the total income, so the loss set-off mechanism under section 24(1) applied to that income.

Ratio Decidendi: A statutory provision granting only partial relief from income-tax on specified dividend income does not exclude that income from total income, and a business loss may be set off against such taxable income under the loss set-off provisions of the Income-tax Act, 1922.

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