9911796707
TMI Blog1998 (3) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... business in that year, was insufficient to set off that loss from the Malaysian business against the profits of the Indian business. The amount so allowed to be carried forward was a sum of Rs. 28,699. The assessee became a nonresident during the assessment year 1977-78. The assessee, after becoming a non-resident, was no longer required to include the income from his business in Malaysia in his return of income for the purpose of taxation under the Indian Income-tax Act, in view of section 5(2) of the Income-tax Act. Nevertheless, the assessee claimed a right to set off the loss incurred by the assessee in his Malaysian business in the earlier assessment year against his income from his business in India to the succeeding assessment year. That claim of the assessee was negatived by the Income-tax Officer as also by the first appellate authority. The Tribunal, however, took a different view in the matter and allowed the claim holding that under section 72 of the Act, the assessee had a vested right to carry forward the loss, and once the loss had been computed, it was required to be allowed in the subsequent assessment years, especially in view of the fact that the Revenue had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to reduce the tax demand. It follows that if such set-off is not permissible or possible owing to the income or profits of the subsequent year being from a non-taxable source, there would be no point in allowing loss to be, 'carried forward'. Conversely, if the loss arising in the previous year was under a head not chargeable to tax, it could not be allowed to be carried forward and absorbed against income in a subsequent year, from a taxable source." It is, therefore, clear that unless there is a taxable source, the question of setting off carried forward loss does not arise, as the loss is determined only for the purpose of being adjusted against the income from the taxable source. Counsel also relied on the decision of the Supreme Court in the case of Indore Malwa United Mills Ltd. v. CIT [1962] 45 ITR 210, wherein, it was held that, the reference to profits or gains in section 24(1) of the Indian Income-tax Act, 1922, refers to taxable profits or taxable gains, and it has no reference to income accruing or arising without British India, or without the taxable territories, which were not liable to be assessed in the case of non-residents and the loss claimed could not be ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orward loss incurred in relation to that business, The computation of that loss, it was submitted, was the computation made in relation to the business, and, if the assessee carried on more than one business, then it is the business in which loss was originally computed that should be carried on and it would not be sufficient, if the other business in which the loss had not occurred in the earlier year, alone continued to be carried on. Learned counsel for the assessee, on the other hand, submitted that the assessee is entitled to the benefit of set off claimed, as section 72(1) of the Act does not require that in cases where a resident becomes a non-resident in a later assessment year, such an assessee becomes disentitled to carry forward the loss and set it off against his Indian income in cases where the loss had been suffered in the earlier year in his foreign business at the time when the assessee was a resident. Counsel also contended that the word "business" used in the proviso refers to the head of "Income" and not the "source" and that once loss had been computed under the head "Business", if the assessee carried on any business in the later assessment year, he would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions made by the Tribunal that the requirements of section 72(1)(ii) of the Act were satisfied as the business in which loss was incurred was being continued, is clearly erroneous as the order of assessment shows, and it was not disputed at any stage by the assessee, that the loss incurred was in Malaysian business which business was a source different from the Indian business and only the income from the business in India was to be computed under the head "Income from business or profession." The continuance of the business in Malaysia, when the income from that business was not subject to Indian income-tax is not in any way material. The fact that after setting off the loss incurred in the Malaysian business against the income from the Indian business in the earlier year, the unabsorbed loss was allowed to be carried forward, does not render that loss as the loss from the Indian business and the continuance of the Indian business alone would not qualify the assessee for claiming the benefit of the provision of carry forward of the unabsorbed loss. The position of the assessee in this case is similar to what would have happened even if the assessee had continued as a resident of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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