TaxTMI 
TaxTMI 
1952 (4) TMI 48
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.... 2. There are two provisos to Section 24(1) Neither the statement of the case nor the appellate order of the Tribunal specifies any of them. Since the first proviso disallows set-off of loss and since that proviso was specifically considered in the decision relied on by the Appellate Tribunal, we take it that the first proviso was intended. The question is otherwise not happily worded. The words "having regard to" should have appeared in place of "under" in this question. In order to bring out the true meaning we reframe the question thus :- Whether on the facts of the case the loss of Rs. 76,973 suffered by the assessee in the Indian State could be set off against the profits accruing or arising in British India, having regard to the first proviso to Section 24(1) of the Indian Income-tax Act ? 3. The last portion of the second question, viz., "in spite of the fact that no income, profits or gains from the Indian State had been received in British India" is not borne out by the statement of the case; nor has it any basis on the record. As is apparent from the order of the Income-tax Officer for the assessment year in question, a sum of Rs. 29,352 was added as income....
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....ct, 1939, income-tax for the year beginning on the April 1, 1939, is directed to be charged at the rate specified in Part I of Schedule II and rates of super-tax are also provided for, and by sub-section (3) it is provided that for the purposes of this section and of Schedule II, the expression total income means total income as determined for the purposes of income-tax or super-tax, as the case may be, in accordance with the provisions of the Indian Income-tax Act, 1922'. This can only refer to the Indian Finance Act, 1939, and necessarily includes the alterations made by the Amending Act, which had already come into force on the April 1, 1939. The assessment for the year 1944-45 must therefore be made according to the Indian Income-tax Act in force on April 1, 1944. The first proviso therefore does not apply to the assessment for that year. See also Mishrimal Gulabchand of Beawar, In re. 6. Section 24(1) and its first proviso run thus :- 24(1) Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in Section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any ....
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....e been assumed in the first question that the British Indian income and the profits and gains in an Indian State of which loss is claimed fall under two different heads of Section 6. It therefore follows that the assessee is entitled to set off the loss if this section is applicable. As the first proviso is not applicable to the assessment year in question, the assessee is entitled to set off the loss of Rs. 76,973 against the profits accruing or arising in British India. 9. In our view this assumption is unwarranted. The income of which loss is claimed is income from business. Different businesses do not constitute different heads under the Act. Section 10 which deals with income from business is self-contained. Profits of all businesses after deducting the "allowances permissible under the section constitute profits of the assessee from business." In computing profits the losses have got to be taken into consideration. This has been recognized in Murlidhar Mathurawallas case relied on by the Appellate Tribunal. 10. The first question was thus based on two assumption which are unwarranted and does not arise on the facts of the case. 11. Our answer to the second question i....
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....is the income arising or accruing in British India, b is the income which has arisen or accrued within an India State, and c the income from an Indian State received or deemed to be received in the account year in British India. We are not introducing Section 42 as it is not necessary for the disposal of this case. Under Section 4(1) read with Section 16(1)(a), a+b+c is the total income liable to tax, but section 14(2)(c) exempts income b from payment of tax, so the resident will have to pay income-tax on a+c at the rate of tax payable on a+b+c. In the event of loss in an Indian State, the total income computed under the Act will be a-b+c and the tax will be paid on this amount as there are no income, gains or profits to which Section 14(2)(c) would apply. If in any year c is not brought into British India, it will be excluded from consideration. Receipt or non-receipt of c does not affect the result. The assessee in the instant case is therefore entitled to deduct the loss suffered by him in an Indian State in the computation of the total income and this will be taxable income as there is no exemption under Section 14(2)(c). 13. In Income-tax Appellate Tribunal, Bombay v. Centr....
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.... In calculated the profits and gains under the fourth head of Section 6, the Income-tax Officer has to prepare a balance-sheet of the result of the working of such businesses with which the Income-tax Officer is concerned and, if he is not concerned with profits of a business carried on in an Indian State, he is obviously not concerned with the losses of that business, so that if the profits of the business cannot be added the losses of the business cannot be deducted either.(p. 81). The assumption underlying these observations is that the income from business in an Indian State is to be excluded for all purposes in view of Section 14(2)(c). With the greatest respect we observe that this is a misapprehension probably due to the fact that the attention of the learned Chief Justice was not drawn to Section 4(1) and Section 16(1)(a) of the Act which provide for the inclusion of such income in the total income of the assessee. The learned Chief Justice was probably influenced in his decision by Section 17(1) which is applicable to non-residents while the assessee before him was resident and an ordinary resident of British India. The learned Chief Justice therefore observed tha....