1980 (8) TMI 12 - HC - Income Tax

Summary

Issues Involved:
1. Eligibility for relief under section 25(4) of the Indian Income Tax Act, 1922, in respect of income from property.
2. Entitlement to set off business loss against income from property under section 24(1) of the Indian Income Tax Act, 1922.
3. Availability of relief under section 25(4) of the Indian Income Tax Act, 1922, in respect of super-tax.

Issue-wise Detailed Analysis:

1. Eligibility for Relief under Section 25(4) in Respect of Income from Property:

The court examined whether the assessee was eligible for relief under section 25(4) of the Indian Income Tax Act, 1922, based on the facts found by the Tribunal. Section 25(4) provides relief from tax for the income, profits, and gains of a business that was charged under the Indian Income Tax Act, 1918, and was succeeded by another person, not merely a change in the constitution of a partnership. The court referred to the Supreme Court's decision in CIT v. Chugandas & Co. [1965] 55 ITR 17, which held that the exemption under section 25(3) was general and not restricted to income chargeable under the head "Profits and gains of business, profession or vocation." The court concluded that the assessee was entitled to relief under section 25(4) even in respect of income from house property, as the income was interlinked with the business activity of the firm.

2. Entitlement to Set Off Business Loss Against Income from Property under Section 24(1):

The court addressed the issue of whether the assessee was entitled to set off the business loss against income from property under section 24(1) of the Indian Income Tax Act, 1922. The figures showed that the property income was Rs. 7,91,548, and the business loss was Rs. 7,92,087. Section 24(1) allows the adjustment of loss under one head against income from any other head. The court noted that there was no prohibition in the Act against the adjustment claimed by the assessee. The court referred to the Supreme Court's decision in CIT v. P. M. Muthuraman Chettiar [1962] 44 ITR 710 and Western States Trading Co. P. Ltd. v. CIT [1971] 80 ITR 21, which supported the view that the assessee was entitled to the relief claimed. The court answered the second question in the affirmative and in favor of the assessee.

3. Availability of Relief under Section 25(4) in Respect of Super-tax:

The court examined whether the assessee was entitled to relief under section 25(4) of the Indian Income Tax Act, 1922, in respect of super-tax. The proviso to section 25(4) states that the relief does not apply to super-tax except where the income, profits, and gains of the business were assessed to super-tax for the first time either for the year beginning on April 1, 1920, or April 1, 1921. The court found that the assessee had been assessed to super-tax for one of these years, and the dispute was whether the assessee was assessed for any earlier year. The court referred to section 19 of the Excess Profits Duty Act, 1919, which provided that if the excess profits duty exceeded the super-tax, only the excess profits duty would be charged. The court concluded that a provisional computation to determine whether super-tax or excess profits duty was chargeable did not constitute an assessment to super-tax. Therefore, the assessee was entitled to relief under section 25(4) in respect of super-tax. The court answered the third question in the affirmative and in favor of the assessee.

Conclusion:

All three questions were answered in favor of the assessee and in the affirmative. The parties were directed to bear their own costs.