TMI Blog1958 (9) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee company's contention was that it was entitled to set off this loss against the profits made in its business in that year, and it also contened that it was entitled to carry forward the unabsorbed depreciation into this year. The first contention of the assessee company was rejected by the Tribunal; the second was allowed; and two questions have been raised, one at the instance of the assessee company and the other at the instance of the Commissioner, dealing with these two aspects of the matter. Turning to the first question, the difficulty is caused by the fact that in 1948-49 we had the Indian State of Indore and certain provisions applied under the Indian Income-tax Act to the profits earned in an Indian State. When we come to 1950-51, which is the year of assessment, the complications both political, economical and financial caused by the existence of Indian States have been done away with and we have one State to which the Income-tax Act applies without any difference or distinction, and what we have to decide in this case is how the two different situations have got to be reconciled. What is urged by Mr. Kolah on behalf of the assessee company is-look at the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd gains of that business, profession or vocation are, under the provisions of clause (c) of sub-section (2) of section 14, exempt from tax, such loss shall not be set off except against profits and gains accruing or arising in an Indian State from the same business, profession or vocation and exempt from tax under the said provisions. Just as he could not set off against any other head under section 24(1), similarly under section 24(2) where we are dealing with exempted losses, he could only carry forward and set off against exempted profits. Now, the whole of Mr. Kolah's argument is that in 1950-51 the assessee company has made profits which are liable to tax. He had incurred losses in 1948-49 and under section 24(2) there is a mandatory provision that those losses shall be carried forward. He says that it is not for him to carry those losses forward, it is not for him to make any claim; it is the statutory obligation of the Department that these losses shall be carried forward; and if he is in a position to satisfy the Department that there are profits made in the same business in which the losses were incurred, he is entitled to set off those losses against the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the previous year for the assessment for the year ending on the 31st day of March, 1950, an assessee has sustained a loss of profits or gains in any business, profession or vocation carried on by him, and such loss would, had the State law continued to be in force, have been set off against the profits and gains, if any, from the same business chargeable to tax in the said year of assessment or in any year subsequent thereto, such loss would be so set off in the same manner, to the same extent, and up to the same year of assessment, as it would have been set off had the State law continued to be in force. So clause 3 gives a right to the assessee to avail himself of the provisions of section 24(2) provided the law of the Indian State permitted him to carry it forward. As we have pointed out, in this case the law of the Indore State did not permit the assessee to carry forward the loss. Therefore, Mr. Kolah himself concedes that his case does not fall under clause 3, but what he says is that although it does not fall under clause 3 it falls under the ordinary law. Well, the argument is not conclusive, but undoubtedly it helps us in the interpretation of the Income-tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 10(2), but it falls under sub-clause (b) of the proviso, and as there is no reference to sub-clause (b), the assessee is not entitled to the benefit which that sub-section provides for the assessee. In our opinion, this contention is based on a misapprehension of the scheme embodied in clause 2 of the Removal of Difficulties Order, 1950. When we look at the relevant provisions of the Act, section 10(2)(vi ) lays down the allowances to which an assessee is entitled in respect of profits and gains of his business for depreciation and the clause contains the various indications as to how the depreciation is to be calculated. There is a proviso to this sub-section and sub-clause (b) of the proviso provides for carrying forward of depreciation which has been allowed when that depreciation cannot be absorbed by reason of profits and gains being sufficient for that purpose, and sub-clause (c) is in the following words: (c) the aggregate of all such allowances made under this Act or any Act repealed hereby, or under the Indian Income-tax Act, 1886, (II of 1886) shall, in no case, exceed the original cost to the assessee of the buildings, machinery, plant or furniture as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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