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TMI Blog1965 (12) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... d capital utilised in the construction of a house by the assessee in Calcutta. The construction began in 1950 and was completed in April, 1952. The house was let out to Shri S. P. Jain, his son, Shri Ashok Kumar Jain, and some sister companies of the Sahu Jain group. A sum of Rs. 12,000 was shown as rent received of this building and a set of furniture therein. Deducting one-sixth for repairs, the net income from the building could be determined at Rs. 10,000, if it was chargeable to tax under the head " Income from property ". But since the erection of the building was begun and completed between 1st day of April, 1946, and the 31st day of March, 1956, its income was not chargeable under the head aforesaid for a period of two years from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act provides : " 9. (1) The tax shall be payable by an assessee under the head "Income from property " . . . subject to the following allowances, namely:- (iv) .... and, where the property has been aquired, constructed, repaired, renewed or reconstructed, with borrowed capital, the amount of any interest payable on such capital." Section 4(3)(xii) of the Act says : Any, income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them : ...... (xii) any income chargeable under the head 'Income from property' in respect of a building the erection of which is begun and completed between 1st day of April, 1946, and the 31st day of March, 1956 (both dates inclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Capital gains." If the income from the property in question is not chargeable to income-tax under clause (iii) of section 6, it is obvious, the loss, if any, in respect of that property cannot be set off against the income, profits or gains of the assessee under any other head chargeable to income-tax as provided for in the other clauses of section 6. In my opinion, therefore, looked at from any angle, the claim of the assessee was untenable and the so-called loss of Rs. 69,265 in relation to the property in question has rightly been not allowed to be set off against the assessee's income under other heads. Mr. Pal appearing for the assessee placed reliance upon two decisions of the Supreme Court in Indore Malwa United Mills Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have been assessable in British India, the loss could be set off although the income for a certain period, in view of the special provisions contained in clause (xii) of sub-section (3) of section 4 of the Act, was exempt from taxation. I do not find any force in this argument. For the purposes of allowing a set-off under section 24(1) or 24(2) of the Act, in principle, the case of resident or non-resident makes no difference nor does the fact as to whether the profits and gains would have been assessable in British India or not assume any importance. The point of significance is that section 24(l) talks of profits or gains which are taxable. This case has been followed recently by a Bench of the Allahabad High Court in Ramjilal Rais v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 24(1) to apply, loss of profits must be a loss of taxable profits." The facts of the case of the Indian Bank Ltd . 2 were these. The bank, in the course of its business, invested a large sum in securities including Mysore Government Securities, the interest on which was exempt from tax. The profits and losses on the purchase and sale of such securities were duly taken into account in computing the income of the bank under the head "Business". For the assessment year 1950-51 it claimed a deduction of Rs. 25,91,565 as interest paid to various depositors under section 10(2)(iii) of the Act. The Income-tax Officer, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal disallowed interest amounting to Rs. 28,01,194. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fil some other condition before it can be allowed. " The Supreme Court, in the earlier portion of the judgment, also observed that the allowance of the expenditure under section 10(2) of the Act does not depend upon the fact whether it has the quality of directly or indirectly producing taxable income. Most types of expenditure which are laid out wholly and exclusively for the purpose of the business would directly or indirectly produce taxable income and it is not worth the administrative effort to go further and trace expenditure to some taxable income. The case of Indore Malwa United Mills Ltd. was distinguished on the ground that the decision therein did not imply that there was a general principle that if a part of the income of a bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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