9911796707
TMI Blog1969 (9) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... etermined the total income at Rs. 53,11,958. The assessment for the immediate preceding year 1955-56 was made by the said Income-tax Officer, on the 16th July, 1957, and for this year, as the income in India exceeded the income outside India. the petitioner's status was taken as resident and ordinarily resident and after deducting the net loss computed from the petitioner's business in the United Kingdom at Rs. 65,61,147 from its Indian dividend income of Rs 34,27,500, the net loss for this year was determined at Rs. 31,33,647. The assessment for the subsequent year 1957-58 was again made in the status of a non-resident some time in November, 1957, only on the total dividend income in India of Rs. 51,85,837. As the assessment for 1956-57 was made before the assessment for 1955-56, the petitioner claimed to set off its loss carried forward from the year 1955-56 against its assessed income for 1957-58 and appealed against the order of assessment for the later year to the Appellate Assistant Commissioner. By his order dated the 14th August, 1958, the Appellate Assistant Commissioner dismissed the petitioner's appeal, inter alia, on the ground that under section 24(2) of the Indian Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturing and selling tea exclusively. The assessee's income from dividend, though treated by the assessee as income from business, is taken for the assessee's assessment under the Indian Income-tax Act as income from other sources. " It would be seen that this is a repetition of the recital contained at the beginning of the Tribunal's aforesaid order and this fact would be material as much was sought to be made out of this statement by Mr. Ray. The aforesaid application was dismissed by the Tribunal on the 1st December, 1966. On the 5th December, 1966, the respondent, Commissioner, passed a consolidated order on the said two applications under section 33A(2) made on the 12th February, 1958. He allowed the first application and directed the Income-tax Officer to determine the loss to be carried forward in the assessment for 1955-56. But be dismissed the petitioner's claim for set off against the dividend income for 1956-57, inter alia, on the following grounds (1) that the dividend earned by the petitioner-company from investments in shares of companies carrying on tea business could never be said to be a part of its business income because investments in shares were not inciden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he dividend from the Indian company has never been treated by the petitioner as income from business and in the returns filed for all the relevant years the said dividend income has been shown under " others sources " and has been assessed as such. Before I deal with the arguments of the learned counsel, it would be convenient to set out the relevant provisions of the Indian Income-tax Act, 1922, which was the Act applicable to the assessment years covered by the impugned order of the Commissioner. Section 6 : " Heads of income chargeable to income-tax.- Save as otherwise provided by this Act, the following heads of income, profits and gains, shall be chargeable to income-tax in the manner hereinafter appearing, namely :- (i) Salaries, (ii) Interest on securities, (iii) Income from property, (iv) Profits and gains of business, profession or vocation, (v) Income from other sources, (iv) Capital gains. " Section 10(2) (vi), proviso (b) : " Where in the assessment of the assessee.........full effect cannot be given to any such allowance.........owing to there being no profits or gains chargeable for that year, or owing to the profits or gains chargeable being less than the allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the order lies to the Appellate Assistant Commissioner or to the Appellate Tribunal but has not been made, the time within which such appeal may be made has not expired, or, in the case of an appeal to the Appellate Tribunal, the assessee has not waived his right of appeal, or (b) where an appeal against the order has been made to the Appellate Assistant Commissioner, the appeal is pending before the Appellate Assistant Commissioner, or (c) the order has been made the subject of an appeal to the Appellate Tribunal : Provided further that an order by the Commissioner declining to interfere shall be deemed not to be an order prejudicial to the assessee. " Mr. Ray, the learned counsel for the petitioner, argued his case as if it was an appeal from the order of Commissioner under section 33A(2) and not an application for high prerogative writs. Sometimes it has been rather difficult to follow his line of thought as he seemed to thing that certain claims made by the petitioner, if not specifically controverted by the department, must be held to be conclusive in deciding the issue. It is well to remember that this is mainly an application for the issue of a writ of certiorari for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tea companies. Mr. Ray further submitted that the averments made in the application under section 33A(2) are also uncontroverted. These are parts of the record before the Commissioner on which the Commissioner had to parts his order and if he had any doubts he could call for fresh evidence or make such other enquiries as he thought necessary. If it is conceded that the assessee treats the dividend from the shares in the tea companies as part of its business income nothing else remains and the petitioner is entitled to the relief claimed in the application under section 33A. Undoubtedly, the petitioner showed the income from the dividend as income under section 12 as it was bound to do but that does not affect its right to claim a set off of business loss from such income if the shares are held as trading assets. Mr. Ray submitted further that the three decisions of the Supreme Court cited before the Commissioner, namely, United Commercial Bank's case, Chugandas & Co.'s case and Cocanada Radhaswami Bank's case establish the proposition contended for by the petitioner, namely, that though the income derived from the heads mentioned in section 6 are assessable under the particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to set off the loss brought forward from the earlier assessment year against its entire income including the interest on securities in the succeeding years. Under section 24(2) of the Indian Income-tax Act, 1922, the income from securities, which formed part of the assessee's trading assets, was part of its income from business and, therefore, the loss incurred in the business in the earlier years could be set off against the income from securities also in the succeeding years. It was further held that the scheme of the Income-tax Act is that income-tax is one tax. Section 6 of the Act classified the taxable income under different heads for the purpose of computation of the net income of the assessee. Though, for the purpose of computation of the income, interest on securities is separately classified, income by way of interest from securities does not cease to be part of income from business if the securities are part of the trading assets. Whether a particular income is part of the income from a business falls to be decided not on the basis of the provisions of section 6 but on commercial principles. Section 24(2) is concerned with the business and not with the heads unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it was not set off against the immediately succeeding year and directed the Appellate Assistant Commissioner to decide the appeal afresh. Mr. Ray alleged that the proceedings under section 33A were resumed with the object of preventing the Appellate Assistant Commissioner from deciding the appeal on the lines as directed by the Tribunal. In its application under section 33A the petitioner made an alternative claim, namely, that in any event even if the loss from business for the earlier year could not be allowed as a deduction from the dividend income of the current year, at least that part of the loss consisting of the unabsorbed depreciation brought forward should be allowed and the decision of the Supreme Court in Jaipuria China Clay Mines (P.) Ltd. was relied on in support thereof. This again has been distinguished by the Commissioner on the ground that the allowance was made by the Supreme Court in that case because the unabsorbed depreciation entered into the computation of business income or loss of the current year and the resultant loss from the business loss was set off against the income computed under other heads of income in the same year. As in this case there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on by the petitioner before him and was conscious of the ratio laid down in these decisions. Therefore, there is no error of law or of any proposition of law in the order. He may be wrong in his interpretation of the Supreme Court's decisions. The only question, therefore, is whether his conclusion that the holding of the shares of the petitioner in the Indian company was not incidental to its business and as such the dividend income therefrom could not be business income was properly arrived at on a consideration of all materials available. Supporting materials for the petitioner's claim, according to Mr. Ray, were : (1) the assertion made in the petition under section 33A ; (2) similar allegations in paragraph 2 of the writ petition and no specific denial thereof in the affidavit-in-opposition ; (3) the recital in the order of the Tribunal ; and (4) the alleged admission by the Commissioner in the reference application under section 66(1). Mr. Gupta pointed out that in the affidavit-in-opposition there was no admission of the petitioner's claim but there was a denial that the department had accepted the dividend income as business income. In any event the assertions in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , section 24(2)(ii) was not attracted. The learned counsel also submitted that the alternative argument that in any event the unabsorbed depreciation of the earlier year should have been allowed is equally untenable. Section 10 is the computing section for the head " business." There the deductions allowable are enumerated in sub-section (2) of that section. Section 10(2)(vi), proviso (b), provides that unabsorbed depreciation brought forward shall be added to the allowance for depreciation for the following year and deemed to be a part of that allowance. So, it would appear that unabsorbed depreciation of any year becomes part of the depreciation for the subsequent years. If in the subsequent year no income under the head " business " is chargeable to tax then there is no assessment under section 10 and no question of any allowance under section 10(2)(vi). In Jaipuria China Clay Mines case relied on by Mr. Ray, it was held that the unabsorbed depreciation became part of the depreciation of the current year and, therefore, the, amount of such depreciation as not set off against the income from the business became business loss which must be set off against the income under other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e erroneous in law. I agree with Mr. Gupta that apart from the assertions made in the petition before the Commissioner and in the appeal before the Income-tax Appellate Tribunal that these shares were part of its trading assets no other material was placed before the Commissioner to come to the conclusion that the dividend income was the petitioner's income from business. Being a non-resident in the assessment years 1936-57 and 1957-58 the petitioner's business income in the U. K. did not come into the computation in its Indian assessment. Therefore, it could not be ascertained whether any business loss of 1935-56 was not set off against its business income in the U. K. in any of these two years. After all it is for the petitioner to satisfy the Commissioner that the shares held by it are part of its business assets and not for the Commissioner himself to find out that the petitioner's contention was correct. The Commissioner's interpretation of the decisions of the Supreme Court cannot be said to be arbitrary or erroneous on its face because the basic fact in all these cases before the Supreme Court was that the assessee carried on business in India and that the income arose from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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