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TMI Blog1965 (4) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------------------------------------------------------------------------------------------- Business income or Year Interest loss (as of on finally Total assessment securities decided by the A.A.C.) (1) (2) (3) (4) --------------------------------------------------------------------------------------------------------------------------------------------------- Rs. Rs. Rs. 1. 1950-51 5,191 886 6,077 2. 1951-52 2,174 1,177 3,351 3. 1952-53 1,885 9,121 11,006 --------------------------------------------------------------------------------------------------------------------------------------------------- For the three succeeding years the department showed the income under the said two separate heads but allowed the said loss to be set off against the income under the head " business " and disallowed it against the income under the head " interest on securities ". The view of the Income-tax Officer was confirmed, on appeal, by the Appellate Assistant Commissioner and, on further appeal, by the Income-tax Appellate Tribunal. The following question was referred by the Tribunal to the High Court for its opinion : "Whether, on the facts and In the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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..... (2) Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March, 1940, in any business, profession or vocation, and the loss cannot be wholly set-off under sub-section (1), so much of the loss as is not so set-off or the whole loss where the assessee had no other head of income shall be carried forward to the following year and set off against the profits and gains, if any, of the assessee from the same business, profession or vocation for that year ; and if it cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following year...." While sub-section (1) of section 24 provides for setting off of the loss in a particular year under one of the heads mentioned in section 6 against the profits under a different head in the same year, sub-section (2) provides for the carrying forward of the loss of one y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two businesses. In ascertaining the income in each of the two businesses, he is entitled to deduct the losses incurred in respect of each of the said businesses. So calculated, if he has loss in one business and profit in the other both falling under the same head, he can set off the loss in one against the profit in the other in arriving at the income under that head. Even so, he may still sustain loss under the same head. He can then set off the loss under the head " business " against profits under another head, say " income from investments ", even if investments are not part of the trading assets of the business. Notwithstanding this process he may still incur loss in his business. Section 24(2) says that in that event he can carry forward the loss to the subsequent year or years and set off the said loss against the profit in the business. Be it noted that clause (2) of section 24, in contradistinction to clause (1) thereof, is concerned only with the business and not with its heads under section 6 of the Act. Section 24, therefore, is enacted to give further relief to an assessee carrying on a business and incurring loss in the business though the income therefrom falls und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said income fell under the specific head mentioned in section 9 of the Act. This case also does not lay down that the income from the shops is not the income in the business. In Commissioner of Income-tax v. Express Newspapers Ltd. this court held that both section 26(2) and the proviso thereto dealt only with profits and gains of a business, profession or vocation and they did not provide for the assessment of income under any other head, e.g., capital gains. The reason for that conclusion is stated thus : "It (the deeming clause in section 12B) only introduces a limited fiction, namely, that capital gains accrued will be deemed to be income of the previous year in which the sale was effected. The fiction does not make them the profits or gains of the business. It is well settled that a legal fiction is limited to the purpose for which it is created and should not be extended beyond its legitimate field...The profits and gains of business and capital gains are two distinct concepts in the Income-tax Act : the former arises from the activity which is called business and the latter accrues because capital assets are disposed of at a value higher than what they cost the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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