TMI Blog1984 (2) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... itled to relief under sections 85, 99(1)(iv), 101(2) and 235 of the Income-tax Act, 1961, on the gross dividends, that is, without reducing them by proportionate management and other expenses? (2) Whether, on the facts and in the circumstances of the case, the assessee was entitled to relief/rebate on the entire portion of tax-free dividend from the State Financial Corporation, that is, without reducing them by proportionate management and other expenses ? (3) Whether, on the facts and in the circumstances of the case, any portion of the business expenditure could be set off against the income of the assessee by way of interest on foreign securities/investments? (4) Whether the assessee was entitled to set off capital loss, if any, on the sale of property at Rangoon during the previous year relevant to relevant to the assessment year 1960-61, which could not be claimed by the assessee and determined by the Income-tax Officer in that year against the capital gain on the sale of property at Karachi during the accounting year relevant to the assessment year 1964-65 ? " Re: Assessment year 1965-66 : " (1) Whether, on the facts and in the circumstances of the case, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to say, in favour of the assessee and against the Department. In view of the answers to questions Nos. 1 and 2, answer to question No. 3 for the assessment year 1964-65 becomes academic and it is not necessary to answer the same. Question Nos. 1 and 2 for the assessment year 1965-66 are answered in the affirmative, that is to say, in favour of the assessee and against the Department. In view of the answers to questions Nos. 1 and 2, answer to question No. 3 for the assessment year 1965-66 becomes academic and we decline to answer the same. For the assessment year 1966-67, questions Nos. 1 and 2 are answered in the affirmative, that is to say, in favour of the assessee and against the Department. The only question that requires consideration is question No. 4 for the assessment year 1964-65. In that assessment year, the assessee had sold its property at Karachi at a profit of Rs. 3,50,343. The assessee claimed to set off against this amount of capital gains a sum of Rs. 3,57,250 being a capital loss suffered by the assessee in respect of transfer of its property at Rangoon during the assessment year 1960-61. It seems that in 1959, a property of the assessee at Rangoon had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny profits and gains falling under that head. Sub-section (2B) of section 24 reads as under : " 24. (2B) Where an assessee sustains a loss such as is referred to in sub-section (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 on, so however, that no such loss shall be carried forward for more than eight years. " In view of these provisions, the assessee was entitled to set off the loss suffered by it and falling under the head " Capital gains " in the assessment year 1960-61 against capital gains in the eight subsequent years in the manner provided in sub-section (2B). Under the Income-tax Act, 1961, the relevant provisions relating to set off or carry forward of loss are contained in sections 70 to 80 of the Income-tax Act, 1961. The relevant section in the present case is section 74. The relevant provisions of section 74 are as under: " 74. (1)(a) Where in respect of any assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1922 (11 of 1922). (b) No loss referred to in sub-clause (ii) of clause (a) of subsection (1) shall be carried forward under this section for more than four assessment years immediately succeeding the assessment year for which the loss was first computed under this Act. " Thus, under the provisions of section 74(1)(b) of the Income-tax Act, 1961, any capital loss which is carried forward in accordance with the provisions of sub-section (2B) of section 24 of the Indian Income-tax Act, 1922, is to be separated into short-term capital loss and long-term capital loss and set off against short-term capital gains and long-term capital gains respectively in the manner set out in section 74(1)(b). This provision became necessary because under the Indian Income-tax Act 1922, no distinction was made between short-term capital gains or losses and long-term capital gains or losses. The right to carry forward a capital loss for period of eight years under the Indian Income-tax Act, 1922, is, however, preserved under section 74(2) of the Income-tax Act, 1961. The first question that requires determination is whether the capital loss which the assessee bank suffered in the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments for the years prior to 1962-63 would be governed by the Indian Income-tax Act, 1922. Section 70 would apply to the year in which the Income-tax Act, 1961, became applicable, that is to say, the assessment year 1962-63. Similarly, section 71 deals with set off of loss from one head of income against another head of income in the same assessment year. Once again, the provisions of section 71 would apply to those assessment years in which the Income-tax Act, 1961, became applicable. Section 72 deals with carry forward and set off of business losses. Section 72 in terms provides that when there is a loss which cannot be or is not wholly set off in accordance with the provisions of section 71, so much of the loss as has not been so set off can be carried forward as laid down in that section. Since this section has a direct reference to the previous section, quite clearly, the scheme of section 72 also will apply to those assessment years which are covered by the Income-tax Act, 1961. Section 74 deals with losses under the head " Capital gains " and how these losses are to be carried forward to subsequent years. Section 74, sub-section (1)(a)(i), lays down that where the net loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears. The right of the assessee to carry forward such a loss for eight years under the Indian Income-tax Act, 1922, is thus preserved. It is, therefore, not possible to accept the submission that the right of the assessee company to carry forward and set off of the loss in question arose under section 74 of the Income-tax Act, 1961. Such a right accrued under section 24(2B) of the Indian Income-tax Act, 1922. At the highest, it is modified to some extent by section 74(1)(b). Under section 6 of the General Clauses Act, 1897, when any Central Act is repealed, such a repeal does not affect any right acquired under any enactment so repealed unless a different intention appears in the repealing Act. No such different intention appears under the Income-tax Act, 1961. The provisions of section 74(1)(b), far from expressing any such different intention, in fact, preserve the right of the assessee company under section 24(2B) of the Indian Income-tax Act, 1922. Similarly, section 297 of the Income-tax Act, 1961, which repeals the Indian Income-tax Act, 1922, does not contain any provision which affects the right to carry forward loss and set it off under the Indian Income-tax Act, 1922. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4A(3). It does not apply to loss carried forward and set off under section 24(2B) of the Indian Income-tax Act, 1922, read with section 74(1)(b) of the Income-tax Act, 1961. Secondly, section 80 requires that a loss should be determined in pursuance of a return filed under section 139. Returns can be filed under section 139 only in respect of the assessment years to which the Income-tax Act, 1961, applies. The assessee company could obviously not have filed a return under section 139 in respect of assessment year 1960-61. There was, therefore, no question of the loss being determined in pursuance of a return filed under section 139. Section 80 also refers to such loss determined under a return filed under section 139 being carried forward and set off as provided under sections 72, 73, 74 and 74A. All these sections relate to losses which arise in the assessment years in which the Income-tax Act, 1961, applies and which are carried forward in accordance with the provisions of the Income-tax Act, 1961. It is true that in respect of a loss which arises in the assessment year covered by the provisions of the Income-tax Act, 1961, such a loss will have to be determined pursuant to a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm of return of total income and total world income in the same manner as he would have furnished a return under sub-section (1) had his income exceeded the maximum amount not liable to income-tax in his case, and all the provisions of this Act shall apply as if it were a return under sub-section (1)." Section 139, sub-section (3), of the Income-tax Act, 1961, contains somewhat similar provision. It is not necessary to examine whether the provisions of section 22(2A) are mandatory or not and whether unless person files a return under section 22(2A), he cannot claim the benefit of the right to carry forward business losses. The Supreme Court in the case of CIT v. Kulu Valley Transport Co. P. Ltd. [1970] 77 ITR 518 has held that it is section 24(2) of the Indian Income-tax Act, 1922, which confers the benefit of business losses being carried forward and set off, and there is no provision in section 22 under which business losses have to be determined for the purpose of section 24(2). Section 22(2A) simply says that in order to get the benefit of section 24(2), the assessee must submit his loss return within the time specified by section 22(1). That provision must be read with sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll Bench of the Madras High Court was required to consider the right of the assessee to carry forward and set off business loss under the provisions of the Indian Income-tax Act, 1922. The Full Bench of the Madras High Court held that section 24(2) of the Indian Income-tax Act, 1922 (before the amendment of 1952 bringing in section 22(2A)) entitled the assessee to carry forward his business losses for a period of six years. The Act did not impose a further condition that the ascertainment of the losses should have been made anterior to the time when the claim to carry forward was made. Similarly, in the present case, the assessee has an unqualified right to carry forward its loss arising under the head " Capital gains " under the provisions of section 24(2B) of the Indian. Income-tax Act, 1922, read with section 74(1)(b) of the Income-tax Act, 1961, subject only to the limitation that such loss is not to be carried forward for more than eight years. Neither of the two Income-tax Acts imposes a further condition that the ascertainment of this loss should have been made anterior to the time when the assessee claims a right to carry forward and set off the loss. In the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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