1952 (3) TMI 50 - HC - Income Tax

Summary

Issues:
1. Assessment of profit or loss by the Tribunal.
2. Interpretation of Section 42 for apportioning profit or loss.
3. Applicability of Section 24(2) for setting off the loss.

Analysis:
1. The High Court examined the Tribunal's method of assessing profit or loss by considering the case where goods were shipped to a foreign principal and a portion of the goods was lost. The Tribunal calculated the net profit on the goods sent and set off the loss caused to the foreign principal. The Court upheld the Tribunal's approach, stating that the entire loss should be considered as the foreign principal's income under Section 42(1) before apportioning it under Section 42(3).

2. Regarding the interpretation of Section 42, the Court emphasized that the income of a foreign principal arising from business connections in taxable territories is taxable under Section 42(1). The Court clarified that apportionment under Section 42(3) is necessary when all business operations are not in taxable territories, and both profits and losses are subject to apportionment based on the operations carried out in taxable territories.

3. The Court addressed the issue of setting off the apportioned loss under Section 24(2). It noted that once a statutory agent is assessed to tax in respect of the foreign principal's income, the agent is deemed the assessee for all purposes. Therefore, the statutory agent has the right to set off losses under Section 24(2) like any other assessee. The Court found no reason to deprive the assessee of this right and held that the loss could be set off under Section 24(2).

In conclusion, the High Court affirmed the Tribunal's method of assessing profit or loss, clarified the application of Section 42 for apportioning profit or loss, and confirmed that the loss could be set off under Section 24(2) for the statutory agent.