TMI Blog1991 (1) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 1964-65. The Income-tax Officer was of the view that the long-term capital loss having been determined in terms of the assessment made under the Income-tax Act, 1961, the time-limit for set off is governed by section 74(2)(b) of that Act according to which long-term capital loss can be carried forward only for a period of four years. He, therefore, held that the assessment year 1964-65 being outside the time-limit, the long-term capital loss of the assessment year 1959-60 cannot be set off against the long-term capital gains assessed for the assessment year 1964-65. Against the assessment order, the assessee appealed to the Commissioner of Income-tax (Appeals) who upheld the order of the Income-tax Officer on the point. The assessee then came up in further appeal before the Tribunal against the order of the Commissioner of Income-tax (Appeals). The Tribunal noted in its order that the question of carry forward of long-term capital loss of Rs. 7,57,320 and set off against the capital loss is not in dispute. What is in dispute is whether it can be carried forward up to the period of four assessment years or eight assessment years. The gap between the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of this Tribunal that the loss under the head "Long-term capital gain" assessed for the year 1959-60 could be carried forward only for four years is thus, apparently, erroneous. On the other hand, the contention of learned counsel for the Revenue is that the assessment order for the assessment year 1959-60 was framed under section 143(3) of the Act and, therefore, the assessee is not entitled to the benefit under section 24(2B) of the Act of 1922 and as such clause (a) of sub-section (2) of section 74 is not applicable. In order to appreciate the controversy, it is necessary to refer to section 74 of the Act, 1961. Section 74 of the Act, so far as material and relevant to our purpose, reads as follows : "74(1)(a) Where in respect of any assessment year, the net result of the computation under the head 'Capital gains' is a loss, such loss shall, subject to the other provisions of this Chapter, be dealt with as follows : ... (ii) such portion of the net loss as relates to capital assets other than short-term capital assets shall be carried forward to the following assessment year and set off against the capital gains, if any, relating to capital assets other than short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an eight assessment years immediately succeeding the assessment year for which the loss was first computed. At this stage, we may usefully refer to the provisions of the 1922 Act. Section 24(1) reads as follows : "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 other head in that year." Section 24(2A) reads as follows: "Notwithstanding anything contained in sub-section (1), where the loss sustained is a loss falling under the head 'Capital gains', such loss shall not be set off except against any profits and gains falling under that head. The relevant part of section 24(2B) reads thus: "Where an assessee sustains a loss such as is referred to in subsection (2A) and the loss cannot be wholly set off in accordance with the provisions of that sub-section, the portion not so set off shall be carried forward to the following year and set off against capital gains for that year, and if it cannot be so set off, the amount thereof not so set off shall be carried forward to the following year and so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricted to four subsequent assessment years. This cannot be the intention of Parliament, It is immaterial whether the assessment was made under the new Act or the old Act. The question has to be determined with reference to the assessment year for which such loss was determined. In our view, having regard to the intention of Parliament, if any capital loss is determined for the assessment year 1961-62 or any earlier assessment year, whether under the Indian Income-tax Act, 1922, or under the Income-tax Act, 1961, the assessee is entitled to have the capital loss carried forward for subsequent eight assessment years. In other words, the benefit of carry forward for eight years would be allowed if the loss arises under the 1922 Act, i.e., for the assessment year 1961-62, or any earlier assessment year and for four years if it arises under the 1961 Act, i.e., to say, for the assessment year 1962-63 and subsequent assessment years. The 1961 Act is prospective in operation and has not taken away the right of the assessee in respect of the loss suffered prior to the commencement of the 1961 Act. It is not procedural as has been contended by learned counsel for the Revenue. It is a substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and objects of the Act cannot cut down the generality of the words used in the statute. The words of statute themselves do best declare the intention of the law given. Farwell, L. J. stated the position in this regard thus : "The mischief sought to be cured by the Act and the aim and object of the Act must be sought in the Act itself. Although it may, perhaps, be legitimate to call history in aid to shew what facts existed to bring about a statute, the inferences to be drawn therefrom are exceedingly slight." (R v. West Riding of Yorkshire County Council [1906] 2 KB 676, 716 (CA)). The Supreme Court, however, in K. P. Varghese v. ITO [1981] 131 ITR 597 observed as follows (p. 608) : "Now, it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Losses of years prior to 1962-63 : Such portion of the losses under the head 'Capital gains' relating to the assessment years prior to 1962-63 as could not be fully set off in the assessment year 1961-62 and were to be carried forward under the provisions of the 1922 Act should be dealt with as follows : The loss should be broken up into short-term capital losses and long-term capital losses. The portion which relates to short-term capital assets shall be carried forward and set off only against short-term capital gains for the assessment year 1962-63 or a subsequent assessment year. The portion which relates to long-term capital assets, shall be carried forward and set off only against long-term capital gains for the assessment year 1962-63 or a subsequent year. In both the cases, the loss shall not be carried forward for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed under the 1922 Act. " (emphasis supplied) Thus, the capital loss pertaining to the assessment year commencing on the 1st day of April, 1961, or in an earlier assessment year could be carried forward up to a period of eight years in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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