TMI Blog1962 (2) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... The judgment of the court was delivered by S. K. DAS J.----These are two appeals on a certificate of fitness granted by the High Court of Judicature at Bombay under section 66A(2) of the Indian Income-tax Act, 1922. The relevant facts which have given rise to them are shortly stated below. The Indore Malwa United Mills, a limited liability company, is the appellant before us and will be referred to in this judgment as the assessee company. The respondent is the Commissioner of Income-tax (Central), Bombay. The assessee company carried on a business of manufacture and sale of textile goods. The manufacture was made at its mills in Indore which was an Indian State before integration and had its own law as to income-tax known as the Indore Industrial Tax Rules, 1927. The sales of textile goods were made at various places, some inside and some outside the taxable territories of British India. For and up to the assessment year 1949-50, the assessee-company was treated as a non-resident within the meaning of section 4A of the Indian Income-tax Act, 1922. For the assessment years 1950-51 and 1951-52, which are the two assessment years under consideration, the account years were th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------- Business profit considered Total income for Sales for which as having been received in Other income the purpose of proceeds were the taxable territories (by accruing in the assessment under received in the apportioning the amount in taxable the Income-tax Act. taxable col. 4 in the proportion of territories (Col 7 plus col. 8) territories col. 5 : col. 6 ) --------------------------------------------------------------------------------------------------------------------------------------------------- 6 7 8 9 Rs. Rs. Rs. Rs. --------------------------------------------------------------------------------------------------------------------------------------------------- 52,68,048 5,05,296 1,854 5,07,150 5,46, 322 21, 028 1,467 22,495 60,000 1,992 1,263 729 (loss) (loss) --------------------------------------------------------------------------------------------------------------------------------------------------- During the course of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act with regard to the answer given by the High Court to the first question and having obtained a certificate of fitness has preferred the two appeals to this court. We are concerned in these two appeals with the correctness or otherwise of the answer given by the High Court to the first question ; the second question does not fall for our consideration. On behalf of the assessee company section 24(2) of the Indian Income-tax Act has been relied on in support of the claim that the assessee company is entitled to carry forward and set off the entire loss of Rs. 5,19,590 incurred in the year 1948-49 against the assessee company's business income for the assessment years 1950-51 and 1951-52. Mr. Kolah appearing on behalf of the assessee company has put his argument in the following way. First of all, he has submitted that the Income-tax Officer wrongly proceeded on the footing as though the assessee company was carrying on two separate businesses, one within the taxable territories and the other outside them. Mr. Kolah has contended that the business was one business within the meaning of section 10 of the Indian Income-tax Act and in the two assessment years in question Indore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , accrue or arise or are deemed to accrue or arise to him in British India during such year. 14. (1) ............................................................................. (2) The tax shall not be payable by an assessee--- (a)............................................................................ (b) ............................................................................. (c) in respect of any income, profits or gains accruing or arising to him within an Indian State, unless such income, profits or gains are received or deemed to be received in or are brought into British India in the previous year by or on behalf of the assessee, or are assessable under section 12B or section 42. 24. (1) 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 : Provided that, where the loss sustained is a loss of profits or gains which would but for the loss have accrued or arisen within an Indian State and would, under the provisions of clause (c) of sub-section (2) of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to this aspect of the case. The answer to the question which we have to consider depends on the true scope and effect of section 24 of the Indian Income-tax Act. Under the Indian Income-tax Act, 1922, assessees are divided into three categories : (a) resident and ordinarily resident, (b) resident but not ordinarily resident, and (c) not resident. We are concerned in the present case with an assessee who in the year in which the loss which is sought to be carried forward occurred was a non-resident. Sub-section (1) of section 4, the material portion of which we have quoted earlier, states that persons who are not resident in India are liable to charge under clause (a) or clause (c) of the said sub-section. They may be taxed under clause (a) on income received or deemed to be received in India even if it accrues elsewhere, or under clause (c) on income which accrues or arises or is deemed to accrue or arise in India even if it is received elsewhere. The liability to tax in respect of income received in India is common to both residents and non-residents and is imposed by the general clause (a). A non-resident, unlike a resident, is not chargeable in respect of income accru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same business in a subsequent year. The argument on behalf of the respondent is that so far as a non-resident is concerned, he is not chargeable in respect of income accruing or arising without India and not received in India. Therefore, in his case it is unnecessary to go to the provisos, but section 24 itself has no application because sub-section (1) of section 24 when it refers to loss of profits or gains, has reference to taxable profits or taxable gains and sub-section (2) of section 24 can only be applied in a case where the loss cannot be set off under sub-section (1) because of the absence or inadequacy of profits etc. In other words, the argument is that section 24 is applicable only to such loss of profits and gains which if they had been profits and gains would have been assessable in British India or the taxable territories ; but in the case of non-residents, income accruing or arising without British India or without the taxable territories not being liable to be assessed, the loss of such profits and gains is not contemplated to be set off within the provisions of section 24, sub-sections (1) and (2). Mr. Kolah has pointed out that sub-section (2) of section 24 ..... 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