Carry forward of agricultural losses under State law cannot be enlarged by Section 72A for amalgamated plantation income.

Income from manufacture of rubber under Rule 7A is first computed as business income and then split, with 65% allocated to assessment as agricultural income under the Kerala Agricultural Income Tax Act, 1991. Any carry forward and set off of losses relating to that agricultural component must be worked out only under Section 12 of the State Act, which permits set off only of the same assessee's loss within the prescribed time limit. The provision does not allow losses of an amalgamated plantation company to be carried forward and adjusted against the amalgamating company's income, and Section 72A of the Income-tax Act, 1961 cannot be invoked to enlarge that entitlement in State agricultural income taxation.

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Issues: Whether the assessee was entitled, while computing agricultural income under the Kerala Agricultural Income Tax Act, 1991, to carry forward and set off the unabsorbed losses of an amalgamated plantation company against the 65% portion of income allocated to agricultural income under Rule 7A of the Income-tax Rules, 1962, and whether Section 72A of the Income-tax Act, 1961 could be invoked for that purpose.

Analysis: Income from manufacture of rubber under Rule 7A is first computed as business income under the Central law and then bifurcated, with 65% allocated to assessment under the State agricultural income tax regime. Any carry forward and set off of losses relating to agricultural income is to be worked out only in the State assessment and only under Section 12 of the Kerala Agricultural Income Tax Act, 1991. That provision permits set off only of the loss of the same assessee, within the statutory time limit, and does not authorise carry forward of the amalgamated company's losses for adjustment against the amalgamating company's income. Section 72A of the Income-tax Act, 1961 does not extend such benefit in the context of agricultural income assessed under the State Act.

Conclusion: The assessee was not entitled to the claimed set off of carried forward losses, and the disallowance was upheld.

Ratio Decidendi: Where income is partly allocable to agricultural assessment under the State Act and partly to Central taxation, carry forward and set off of losses relating to the agricultural component can be claimed only under the State enactment and only within the limits of that enactment, not by importing Section 72A of the Income-tax Act, 1961 to enlarge the entitlement.

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