1962 (3) TMI 80 - HC - Income Tax

Summary

Issues Involved:
1. Whether the entire amount of loss related to the trading period from January 1, 1951, to December 31, 1951, should be allowed in the hands of the assessee company.

Issue-wise Detailed Analysis:

Issue 1: Allowance of Entire Loss in the Hands of the Assessee Company

Facts:
- The assessee company was incorporated on May 29, 1951, and received its certificate of commencement of business on June 21, 1951.
- Prior to its incorporation, on March 29, 1951, an agreement was made by a promoter, Shri B. L. Lahoty, to purchase Rosekandy Tea Estate, effective from January 1, 1951.
- The estate was formally conveyed to the assessee company in November 1951, with actual possession taken on December 1, 1951.
- The trading results for the year ended in a loss of Rs. 1,05,593, with the Income-tax Officer attributing only Rs. 20,808 of this loss to the assessee company for the period after its incorporation.

Legal Arguments:
- The Tribunal allowed the entire loss to the assessee company, relying on the decision in Commissioner of Income-tax v. Bijli Cotton Mills Ltd.
- The Income-tax Officer and Appellate Assistant Commissioner disallowed the loss incurred before the company's incorporation.

Judgment Analysis:
- The court examined whether the assessee company could claim the entire loss for the period from January 1, 1951, to December 31, 1951.
- It was held that under Section 10 of the Income-tax Act, tax must be paid by an assessee in respect of profits or gains of any business carried on by him.
- The court noted that a business must be carried on by the assessee for them to be liable for tax or entitled to claim losses.
- The court distinguished the facts from the Bijli Cotton Mills case, emphasizing that a company cannot be assessed for a period before its incorporation.
- The court also referenced E.D. Sassoon & Co. Ltd. v. Commissioner of Income-tax, where the Supreme Court held that income accrues to an assessee when they acquire a right to receive it, which was not applicable here as the company did not exist before its incorporation.

Conclusion:
- The court concluded that the assessee company could not claim the entire loss for the period from January 1, 1951, to December 31, 1951.
- The loss attributable to the period before the company's incorporation could not be allowed in its hands.
- The answer to the question was in the negative, and the assessee was liable to pay the costs of the reference.

Final Decision:
- The entire amount of loss related to the trading period from January 1, 1951, to December 31, 1951, should not be allowed in the hands of the assessee company.
- The judgment was delivered in the negative, against the assessee.

Separate Judgment:
- Laik J. concurred with the judgment, agreeing that the question should be answered in the negative.