9911796707
|
Home
Issues:
Interpretation of Section 24(2) of the Indian Income-tax Act, 1922 regarding the set-off of losses carried forward from earlier years against current year's profits. Analysis: The case involved a query on whether the assessee was entitled to set off losses carried forward from earlier years under clause (iii) of sub-section (2) of section 24 of the Indian Income-tax Act, 1922. The assessee, a company engaged in manufacturing woollen goods, faced losses in its manufacturing business and subsequently discontinued the manufacturing operations. The Income-tax Officer treated these losses as business losses totaling Rs. 4,03,843. The assessee sought to set off these losses against its business profits in the subsequent assessment years. However, the departmental authorities and the Tribunal denied the set-off, stating that since the assessee had ceased the business that incurred the losses, it was not entitled to set off those losses against other business income. The court examined Section 24(2) which allows for the carry-forward of losses under specific conditions. It was noted that sub-section (2) emphasizes that losses can only be carried forward and set off against profits in the following years if the business, in which the loss was incurred, continued to exist. The court rejected the argument that losses could be carried forward under sub-clause (iii) even if they could not be set off in the immediate following year. The court emphasized that the fundamental principle is that business losses can only be carried forward and adjusted against profits in subsequent years if the business continues to operate. The court highlighted that under Section 24(1), an assessee can set off losses against income from other heads in the same year. Sub-section (2) outlines the conditions for carrying forward losses to subsequent years for set-off. It specifies that if the business that incurred the loss is not continued in the following year, the loss cannot be carried forward and set off against profits of that year. The court clarified that sub-clause (iii) allows for the carry-forward of losses only if they could not be fully set off under sub-clauses (i) and (ii), and does not permit carrying forward losses from a business that is no longer operational. Therefore, in this case, as the business had ceased to exist, the losses from that business could not be carried forward and set off against other business income in subsequent years. In conclusion, the court answered the question in the affirmative, ruling against the assessee's claim for set-off of losses carried forward from earlier years. The court awarded costs to the department and emphasized that business losses can only be carried forward and set off against profits in subsequent years if the business continues to operate, as per the provisions of Section 24(2) of the Indian Income-tax Act, 1922.
|
