1949 (10) TMI 9 - HC - Income Tax

Court disregards Rs. 25,391 loss in business income calculation for 1944-45. Section 24(1) proviso inapplicable.

MISHRIMAL GULABCHAND OF BEAWAR, IN RE

MISHRIMAL GULABCHAND OF BEAWAR, IN RE - [1950] 18 ITR 75 (All) Issues Involved:1. Whether the sum of Rs. 25,391 should have been ignored or deducted in determining the assessee's income from business for the assessment year 1944-45.2. Whether the first proviso to Section 24(1) of the Indian Income-tax Act could apply to the assessment made for the year 1944-45.Issue-Wise Detailed Analysis:Issue 1: Deduction of Rs. 25,391 Loss in Determining IncomeThe primary issue revolves around whether the loss of Rs. 25,391 incurred by the assessee in the Indian States should be deducted from the assessee's income from business in British India for the assessment year 1944-45. The Income-tax Officer initially did not debit this loss, a decision upheld by the Assistant Income-tax Commissioner but later reversed by the Appellate Tribunal.The court examined Section 24(1) of the Indian Income-tax Act, which deals with the set-off of losses under one head against profits under another head. The court noted that this section does not apply to set-offs within the same head, such as business income. The court emphasized that no provision in the Income-tax Act allows for the set-off of losses incurred outside British India against profits earned within British India. The court reasoned that if the profits from business in Indian States are not taxable unless received in British India, the losses from such business should also not be considered.The court concluded that the loss of Rs. 25,391 should be ignored in determining the assessee's income from business for the previous year, affirming that the assessee cannot claim a set-off or deduction without a specific provision of law permitting it.Issue 2: Applicability of the First Proviso to Section 24(1)The second issue pertains to whether the first proviso to Section 24(1) of the Indian Income-tax Act, which came into force on April 12, 1944, applies to the assessment year 1944-45. The court referred to the Judicial Committee's decision in Maharajah of Pithapuram v. Commissioner of Income-tax, Madras, which established that the law in force at the time of assessment, not the law during the income-earning year, governs the assessment.The court cited precedents, including Commissioner of Income-tax, Bombay v. Sind Hindu Provident Funds Society and Maharajah of Pithapuram, to support this principle. The court noted that the Finance Act of 1944, effective from April 1, 1944, would govern the assessment year 1944-45. Therefore, the first proviso to Section 24(1), which came into effect after the relevant accounting year, does not apply to the assessment made for the year 1944-45.ConclusionThe court answered the first question affirmatively, stating that the loss of Rs. 25,391 should be ignored in determining the assessee's income from business. For the second question, the court concluded that the first proviso to Section 24(1) does not apply to the assessment made for the year 1944-45. The assessee was ordered to pay the cost of the reference, assessed at Rs. 400.Additional ObservationsThe court highlighted the necessity for fuller statements of the case, including primary facts and the Tribunal's appellate order, to aid in the legal analysis. The court noted that the assessee did not raise objections to the statement of the case, thus the court could not consider new objections raised during arguments.