1976 (4) TMI 17 - HC - Income Tax

Act Of 1961, Carry Forward, Law Applicable, Registered Firm, Set Off, Speculation Business, Speculation Loss

Summary

Issues Involved:
1. Whether the speculative losses of assessment years 1959-60, 1960-61, and 1961-62 could be carried forward and adjusted against the speculation profits of the assessee-firm for the assessment year 1964-65.

Detailed Analysis:

1. Context and Background:
The Income-tax Appellate Tribunal referred the question regarding the carry-forward and adjustment of speculative losses from assessment years 1959-60, 1960-61, and 1961-62 against the speculation profits of the assessee-firm for the assessment year 1964-65. The assessee, a registered firm, had speculative losses amounting to Rs. 37,199 for the years 1959-60 to 1963-64.

2. Legal Provisions:
The relevant sections of the Income-tax Act, 1961 (sections 73 and 75) and the Indian Income-tax Act, 1922 (sections 24(1) and 24(2)) were analyzed. Section 73(1) restricts the set-off of speculative losses to profits from another speculation business, while Section 75(1) mandates that any loss not set off against other income of a registered firm must be apportioned between the partners.

3. Tribunal's Decision:
The Tribunal, following the Supreme Court's decision in Commissioner of Income-tax v. Kantilal Nathuchand Sami [1967] 63 ITR 318, allowed the set-off of speculative losses against the firm's speculation profits and permitted the carry-forward of losses.

4. Department's Contention:
The department argued that under the 1961 Act, specifically section 75, speculative losses of a registered firm must be apportioned between the partners and carried forward by them, not by the firm. They contended that the principle from Kantilal Nathuchand's case could not be applied under the 1961 Act.

5. Assessee's Argument:
Counsel for the assessee argued that the right to carry forward speculative losses under the 1922 Act was a substantive right, which should not be extinguished by the repeal of the Act. They cited section 6(c) of the General Clauses Act, which preserves rights accrued under repealed enactments unless a contrary intention appears.

6. Court's Analysis:
The court examined the applicability of section 6 of the General Clauses Act in light of section 297(2) of the 1961 Act, which outlines the consequences of the repeal of the 1922 Act. The court noted that section 297(2) is a self-contained code that specifies the operation of the old law and the new law for various matters. Since section 297(2) does not preserve the right to carry forward speculative losses of a registered firm, the court found that the right created by section 24(2) of the 1922 Act did not survive the repeal.

7. Conclusion:
The court concluded that the speculative losses of the years 1959-60, 1960-61, and 1961-62 could not be set off against the speculation profits of the firm for the assessment year 1964-65 under the provisions of the 1961 Act. The question was answered in the negative, in favor of the department and against the assessee. There was no order as to costs, and counsel's fee was assessed at Rs. 200.