TMI Blog1953 (3) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... puted the Tribunals decision with respect to the net amount of ₹ 51,671. In these circumstances, the question that has been referred to us by the Appellate Tribunal is :- Whether the net loss of ₹ 51,671 suffered by the assessee in business at Bombay is liable to be set off against the assesses income from the business in Hyderabad in the previous year relevant to the assessment year 1358 F. ? The assessee contended before the Appellate Tribunal in regard to the loss referred to above that it should have been allowed to be set off against the profits in Hyderabad, in view of the decision in Commissioner of Income-tax, Bombay City v. Murlidhar Mathurawala, or alternatively to reckon this loss for the purpose of fixing the rate at which other income is liable to tax. The department relied upon the case of case Mishrimal Gulabchand of Beawar, In re. The Income-tax Tribunal, however, followed the Bombay decision of Commissioner of Income-tax, Bombay City v. Murlidhar Mathurawala, and directed the Income-tax Officer to allow the assessees claim for set-off of the Bombay loss against Hyderabad income and, in these circumstances, it did not consider it necessary to decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 helped the assessee and that therefore the loss incurred in the Indian State should be ignored in determining the assessees income from business. 4. The learned Judges of the Allahabad High Court took a similar view to the of the Bombay High Court in so far as the interpretation of Section 24(1) is concerned in holding that it applies to a case where the assessee tries to set off a loss under one head of income against profits under some other head of income although Malik, C.J., considered that the provision to Section 24(1) of the Indian Income-tax Act does no t apply to the assessments made in the year 1944-45, in view of the provisos of the Section 6 of the Finance Act, 1944, if was unnecessary to answer the arguments advanced that the first proviso to Section 24(1) enlarges the scope of the said sub-section (1) or that Section 24 was intended to include the whole law of set-off. The learned Chief Justice observed at page 81 :- In calculating the profits and gains under the fourth head of Section 6, the Income-tax Officer has to prepare a balance-sheet of the result of the working of such businesses, with which the Income-tax Officer is concerned, and, if he is not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hyderabad Income-tax Act) an assessee is to be charged subject to the provisions of the Act in respect of the total income of the previous year at a rate current for the year of assessment. Section 2(15) defines total income to mean the total amount of income, profits and gains referred to in sub-section (1) of Section 4 computed in the manner laid down in the Act. 8. Section 4(1) [Section 4(1) of the Hyderabad Act] makes the chargeability of income depend upon the locality of accrual or receipt and divides the assessees whose incomes are to be taxed as (a) resident or ordinarily resident, (b) resident and not ordinarily resident, and (c) non-resident. Residence is defined in Section 4-A and ordinary residence in Section 4-B. It will thus be seen that Section 4 defines the extent of total income with reference to the residence of the assessee. If the assessee is resident, then the question would arise whether he is also not ordinarily resident so as to entitle him to the exemption provided in the second proviso to Section 4(1). 9. The incidence of taxation is highest in the case of a person resident and ordinarily resident and not so high in the case of a person who is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred in an Indian State cannot be set off, is in our view untenable. 12. Section 16(1) corresponding to Section 20(1) of the Hyderabad Income-tax Act envisages the computation of total income even where any sum is exempted by the provisions of the Act. The said section in so far as it is relevant is in the following terms : In computing the total income of an assessee - (a) any sums exempted under the second proviso to sub-section (1) of Section 7, the second and third proviso to Section 8, sub-section (2) of Section 14 and Section 15 shall be included; and any sum exempted under Section 15-A shall also be included except for the purpose of determining the rates at which income-tax (but not super-tax) is payable by the assessee to whom the exemption is given. 13. It will thus be seen that the total income of an assessee has to be computed after making necessary allowances and deductions and setting off losses in accordance with the provisions of the Act, and the tax has to be paid only on the income, profits and gains after allowing for the exemptions and relief provided for in the Act at the rate to be determined in accordance with the total income so computed. Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom property and loss from property may be set off against income from business. Where the case is only confined to the question, as in this case, of setting off losses under the same head, viz., business, Section 24(1) does not apply and if that does not apply, neither proviso (1), nor (2) applies. 15. It has been contended by the learned Advocated for the department that the first proviso has a wider significance going beyond the scope of sub-section (I) of Section 24 and as such losses incurred either in an Indian State (or under the Hyderabad Income-tax Act in India or Pakistan) shall not be set off except against profits or gains according or arising within any native State (or India or Pakistan as the case may be) and exempt from tax under the said provisions. As observed by their Lordships of the Privy Council in M. S.M. Railway Co., Ltd. v. Bezwala Municipality, the proper function of a proviso is to except and deal with a case which would otherwise fall within the general language of the main enactment and its effect is confined to that case. 16. The view that the provisos to Section 24 have no wider application and are limited by the main section has been taken in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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