TMI Blog1964 (3) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... re exempt from charge but areliable to be included in the total income - If the assessee has earned a profit during the broken period, it is not liable to be considered for any purpose in respect of the assessment year to which the broken period relates - Held that: assessee is not entitled to have the loss suffered during the period April 1, 1948, to March 30, 1949, set off against the income under other heads under section 24(1) in the assessment for thea ssessment year 1949-50 - Question answered in the negative - - - - - Dated:- 2-3-1964 - DESAI M.C., PATHAK R.S. JJ. JUDGMENT The Income-tax Appellate Tribunal has referred this case for decisionon the following question : " Whether, on the facts and circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... broken period considered in relation to the assessment year 1949-50. As the business had resulted in a loss during the broken period, no actual benefit accrued to the assessee for the assessment year1949-50, if the business alone was considered for assessment. But the assessee claimed that it was entitled to set off the loss from the business against the income under other heads by virtue of section 24(1) in the assess-ment proceedings for the assessment year 1949-50. This claim was rejected by the Income-tax Officer, and he did not set off the loss against the income under other heads for the assessment year 1949-50. The Appellate Assis-tant Commissioner, however, on appeal, held in favour of the assessee but the Appellate Tribunal revers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16(1)(a) which declares that in computing the total income of an assessee any sums exempted under some of the provisions mentioned aboves hall be included. These sums are included in the total income for the pur-pose of determining the true rate applicable to the taxable income of thea ssessee. The sum exempted under section 25(4) is not referred to in section16(1)(a) and is not liable to be included in the total income of the assessee. It is exempt altogether from the operation of the Act. The Bombay High Court took this view in Commissioner of Income-tax v. N. M. Raiji (1), and we are in respectful agreement with that decision. The assessee points out that before its amendment by the Income-tax(Amendment) Act, 1939, the definition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration of the Income-tax Act, then there is no basis for applying the provisions of section 24(1) to that sum. If the assessee has earned a profit during the broken period, it is not liable to be considered for any purpose in respect of the assessment year to which the broken period relates. If the assessee has suffered a loss, then equally it cannot be considered for any purpose in proceedings for that assessment year. For section 24(1) to apply, loss of profits must be a loss of taxable profits. The Supreme Court in Indore Malwa United Mills Ltd. v. Commissioner of Income-tax (1) has pointed out : ". . . . . section 24 itself has no application because sub-section (1) of section 24 when it refers to loss of profits or gains, has refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of the same loss. We have been referred by the assessee to Seth Jamnadas Daga v. Commissioner of Income-tax (1). In that case, however, the sum under consideration was the assessee's share of profit exempt under section 14(2)(a)but liable to be included in his total income under section 16(1)(a). The Supreme Court held that although section 14(2)(a) operated to save the pro-fits of an unregistered firm from liability to tax in the hands of the partners, it did not affect the computation of their total income for the purpose of determining the rate applicable under section 3 in the light of section16(1)(a). The nature of the sum in the case was wholly different from that in the instant case. There, the sum was liable to be incl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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