Carry-forward of pre-1962 capital loss preserved for eight years despite computation under the 1961 tax law.

Long-term capital loss relating to an assessment year up to 1961-62 retained the eight-year carry-forward benefit under the 1922 Act, because section 74 of the Income-tax Act, 1961 applied the four-year limit only to losses arising under that Act. Legislative material indicated that earlier losses were not intended to lose the existing advantage, and the procedural machinery in section 297(1)(b) did not affect that substantive right. Computation of the loss under the 1961 Act was therefore immaterial to the period of carry forward.

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Issues: Whether long-term capital loss relating to an assessment year prior to 1962-63, though computed under the Income-tax Act, 1961, could be carried forward for eight assessment years or was restricted to four years under section 74 of that Act.

Analysis: The earlier law under section 24(2B) of the Indian Income-tax Act, 1922 allowed carry forward of capital loss for eight years and did not distinguish between short-term and long-term capital assets. The amendment introducing section 74 of the Income-tax Act, 1961 made that bifurcation and reduced the carry-forward period for long-term capital loss to four years for losses arising under the 1961 Act, but the legislative material showed that losses up to assessment year 1961-62 were not intended to be deprived of the existing eight-year benefit. The procedural requirement in section 297(1)(b) of the 1961 Act, governing assessments where returns were filed late, did not alter the substantive right attached to losses of earlier assessment years. The computation of the loss under the 1961 Act was therefore immaterial for deciding the period of carry forward.

Conclusion: The assessee was entitled to carry forward the long-term capital loss for eight assessment years, and not merely four years.

Ratio Decidendi: For a capital loss relating to an assessment year up to 1961-62, the right to carry forward for eight years is a substantive right preserved by the 1922 Act and is not lost merely because the assessment or computation was made under the procedural machinery of the Income-tax Act, 1961.

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