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TMI Blog1982 (9) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... 80. In this assessment, share allocation to Dr. Kamlesh Madan inclusive of unabsorbed depreciation came to Rs. 69,822. During the course of the assessment proceedings, it was claimed that this loss should be set off against income of Dr. R.N. Madan in view of the provisions of section 64(1)(i) of the Income-tax Act, 1961 ('the Act'). However, the ITO negatived this claim by placing reliance upon the Circular No. 104, dated 19-2-1973 issued by the CBDT. The assessee, therefore, felt aggrieved and went in appeal before the Commissioner (Appeals). 3. The Commissioner (Appeals) took into consideration the provisions of section 64(1)(i), read with Explanation 2 to section 64(2), inserted by the Finance Act, 1979 with effect from 1-4-1980. He he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income (excluding the income referred to in that clause) is greater ; and where any such income is once included in the total income of either spouse, any such income arising in any succeeding year shall not be included in the total income of the other spouse unless the ITO is satisfied, after giving the spouse an opportunity of being heard, that it is necessary so to do. The Finance Act, 1979 added Explanation 2 to section 64(2) with effect from 1-4-1980. This Explanation clarifies that for the purposes of this section, 'income' includes loss. 5. On the issue whether income includes loss, there is a judgment of the Gujarat High Court in the case of Dayalbhai Madhavji Vadera v. CIT [1966] 60 ITR 551 wherein their Lordships have held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would become impossible. In other words, that interpretation will make the statute unworkable. This becomes clear if an example is taken of a case where the share of the wife of an individual has been determined at a plus figure and that is included in the total income of the individual or the spouse and after the assessment is challenged in appeal in the case of the firm, that positive figure is taken into negative. In such a situation, the connotation of the word 'income' taken as positive income would necessitate the loss to be excluded at the time when the assessment may have to be revised in order to give effect to the order of appellate authorities under section 250/254 read with section 155(1) of the Act. It, therefore, becomes cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Commissioner by reference to the speech of the Finance Minister made on 28-2-1975 when he was explaining the provisions contained in the amendments in the Finance Bill, 1979. In paragraph 102 of the speech of the Finance Minister, there is indication, as pointed out by the learned Commissioner, that the changes made in the income-tax law through the Finance Bill which were of minor significance were largely in the nature of clarification and rationalisation of the existing provisions. Therefore, the intent of Parliament in the introduction of Explanation 2 to section 64 was ostensibly putting at rest the controversy whether 'income' includes loss. Since this Explanation had come on the statute book when the assessment/appeal was decid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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