1987 (4) TMI 2 - SC - Income Tax

Rights of the assessee under s.24(2) of 1922 Act to carry forward speculation losses - assessee registered firm is entitled to set off speculation loss computation under Indian Income-Tax Act 1922 against speculation profits in the subsequent year because it is the vested right of assessee

Summary

Issues Involved:
1. Whether the assessee is entitled to set off the speculation losses suffered in the assessment years 1960-61 and 1961-62 against the speculation profits of the previous year 1962-63.
2. Interpretation of section 75 of the Income-tax Act, 1961, and its impact on the right to carry forward and set off losses accrued under the Indian Income-tax Act, 1922.
3. Application of section 6 of the General Clauses Act, 1897, in preserving accrued rights after the repeal of the 1922 Act.

Detailed Analysis:

1. Entitlement to Set Off Speculation Losses:
The assessee, a registered partnership firm, suffered speculation losses amounting to Rs. 60,054 in the assessment year 1960-61 and Rs. 6,839 in 1961-62. For the assessment year 1962-63, the assessee made a speculation profit of Rs. 58,102 and claimed to set off the previous losses against this profit. The Income-tax Officer rejected this claim, stating that as a registered firm, the losses could only be carried forward and set off by the partners, not by the firm itself. The Appellate Assistant Commissioner upheld this decision. However, the Tribunal allowed the appeal, stating that the right to carry forward the losses was governed by the 1922 Act and not affected by the 1961 Act. The High Court of Allahabad also ruled in favor of the assessee, affirming that the right to set off losses accrued under the 1922 Act continued to subsist.

2. Interpretation of Section 75 of the Income-tax Act, 1961:
The Revenue argued that with the enactment of the 1961 Act, which came into effect on April 1, 1962, the right to carry forward and set off speculation losses by a registered firm no longer existed. Section 75 of the 1961 Act introduced a new scheme where losses of a registered firm could only be apportioned between the partners, who alone could carry forward and set off such losses. The Revenue relied on the Allahabad High Court's decision in CIT v. Mangiram Gopi Chand, which held that the right of a registered firm to set off and carry forward losses under the 1922 Act did not survive the enactment of the 1961 Act. However, the Supreme Court disagreed with this interpretation, stating that section 75(2) did not expressly or by necessary implication take away the vested right accrued under the 1922 Act.

3. Application of Section 6 of the General Clauses Act, 1897:
The Supreme Court emphasized that a right accrued under the 1922 Act is a vested right, which continues to be enforceable unless explicitly taken away by the repealing statute. Section 6(c) of the General Clauses Act, 1897, preserves such accrued rights unless the new statute expressly or impliedly indicates otherwise. The court found no indication in section 297 of the 1961 Act that the Legislature intended to extinguish the right to carry forward and set off losses accrued under the 1922 Act. The court cited previous judgments, including Karimtharuvi Tea Estate Ltd. v. State of Kerala and T.S. Baliah v. T.S. Rangachari, to support the principle that accrued rights are preserved unless expressly taken away.

Conclusion:
The Supreme Court held that the assessee's right to carry forward and set off speculation losses accrued under the 1922 Act was a vested right that continued to subsist despite the enactment of the 1961 Act. The appeal by the Revenue was dismissed, and the judgment of the High Court of Allahabad was upheld. The court appreciated the assistance provided by the amicus curiae, Shri D. Chandrachud, and awarded costs of Rs. 2,500 to him.