TMI Blog1949 (10) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Income- tax Commissioner and held that the proviso to Section 24(1) of the Act did not apply. On an application made by the Income-tax Commissioner the Tribunal had made this reference on two points:-- (1) Whether in the circumstances of the case the sum of ₹ 25,391 should have been ignored in determining the assessee's income from business in the previous year relevant to the assessment year 1944-45, or whether that sum should have been deducted from the assessee's income from business in the previous year relevant to the assessment year 1944-45? (2) Whether the first proviso to Section 24(1) of the Indian Income-tax Act could apply to assessment made for the year 1944-45? The second question was referred to us at the instance of the assessee as the account year 1943-44 ended on the 31st of March, 1944, and the first proviso to Section 24(1) did not come into force till the 12th of April, 1944. Taking up the second question first, the point appears to me to be concluded by the decision of their Lordships of the Judicial Committee in Maharajah of Pithapuram v. Commissioner of Income-tax, Madras [1945] 13 I.T.R. 221 It has been urged by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship of the Judicial Committee observed as follows:- It should be remembered that the Indian Income-tax Act, 1922, as amended from time to time, forms a code, which has no operative effect except so far as it is rendered applicable for the recovery of tax imposed for a particular fiscal year by a Finance Act. This may be illustrated by pointing out that there was no charge on the 1938-39 income either of the appellant or his daughters, nor assessment of such income, until the passing of the Indian Finance Act of 1939, which imposed the tax for 1939-40 on the 1938-39 income and authorised the present assessment. By sub-section (1) of Section 6 of the Indian Finance Act, 1939, income-tax for the year beginning on the 1st April, 1939, is directed to be charge at the rates 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 purpose 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of income-tax the income under each head was added in arriving at the aggregate amount of the income chargeable to tax and if there was loss under any head, profits shown were entered as nil and not the minus figure of the loss. Section 24(1) was, therefore, enacted to provide for adjustment of losses under one head of income against the profits under another head. Profits and gains of business, profession or vocation were taken as one head and if the assessee carried on several business or had along with it a profession or a vocation, under Section 10 of the Income-tax Act in preparing the balance sheet the result naturally was shown, as the total profits and gains, after the losses had been deducted. It was, therefore, not necessary to make provision similar to the provision in Section 24(1) for setting off all losses against profits made under the same head, as, whatever may be the nature of the business, the Income-tax Officer had to take the result of the various types of business, profession or vocation carried on by the assessee and he could not, therefore, ignore the losses in calculating the profits and gains under clause (iv) of Section 6. Under Section 14(2)(c) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose. The other sub-sections of Section 10 make similar provisions explaining the method of computing the profits and gains and how it is to be done. Section 10, therefore, primarily concerns itself with the income of the assessee in respect of which the income- tax payable. That section must be read along with clause (c) of sub-section (2) of Section 14 which exempts income, profits and gains arising to the assessee within an Indian State, unless such income. profits or gains received or deemed to be received in British India, or brought into British India in the previous year by or on behalf of the assessee. If such income becomes taxable by reason of the fact that it is received in British India, or brought into British India, in the previous year, to my mind, it would become an income from other sources rather than an income from business. Be that as it may, on the facts stated in the statement of the case that the assessee had made a profit of ₹ 38,473 from business in British India, and had suffered a loss of ₹ 25,391 from its business in India States and on the finding that the first proviso to section 24, sub-section (1), is not applicable and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cost of this reference which we assess at a sum of ₹ 400. SETH, J.--I agree that the first question should be answered in the affirmative and the second in the negative, and have nothing to add to what has been said by my Lord the Chief Justice in answer to the second question. So far as the first question is concerned, it is conceded that the assessee is not entitled to claim that the losses incurred in the business in the Indian States should be set off against the income from business in British India under Section 24(1) of the Indian Income-tax Act, for that section applies only when losses sustained under one head are sought to be set off against income, profits and gains under some other head and not under the same head, mentioned in Section 6 of the Act. In this case the losses which are sought to be set off and the income against which they are sought to be set off have both arisen under the same head business. There is no other section of the Income- tax Act, which provides for the set-off of losses against profits. The submission on behalf of the assessee, however, is that in computing the assessable income of the assessee under the head business under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax shall be payable by an assessee on profits and gains of business carried on by him outside Indian States. It is thus manifest that an assessee is liable to pay tax on all profits and gains from business carried on outside Indian States, and it is equally manifest that in ascertaining profits and gains from such business, a consideration of losses incurred in business carried on in an Indian State is absolutely irrelevant. I am, therefore, of the opinion that the loss of ₹ 25,391 in the business carried on in Indian States should be ignored in determining the assessee's income from business in the previous year relevant to the assessment year 1944-45. All that I wish to add to what has been said by my Lord the Chief Justice about the statement of case is, that it is extremely desirable that the statement of a case should contain not only the relevant conclusion of facts arrived at by the Tribunal, but that it should also contain all primary facts found, on which those conclusions are based, and that the statement of a case should have annexed to it at least the order passed on appeal by the Appellate Tribunal. I concur in the order proposed. Reference answered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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