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TMI Blog1955 (8) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... re. The Income-tax Officer, however, determined the assessee's income at ₹ 90,947 representing profits of the branches in the Travancore State only. He refused to deduct ₹ 79,275 shown in the return as losses from the branches situate outside the Travancore State. In appeal filed by the assessee before the Appellate Assistant Commissioner of Income-tax, Trivandrum, the Appellate Assistant Commissioner also held that the losses from the branches outside the Travancore State could not be deducted in computing the income of the assessee. Reliance was placed on the decision of the Allahabad High Court in the case of Mishrimal Gulabchand [1950] 18 I.T.R. 75. The assessee preferred a second appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal, in its order dated 18th February, 1952, held that the business of banking carried on by the assessee at the head office and all the branches both in and out of Travancore should be considered as one and indivisible and that, therefore, the loss of ₹ 79,275 incurred by the assessee outside the Travancore State should be deducted from the profits made within the State. The Commissioner of Income-tax, Mysore, T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss sustained is a loss of profits or gains which would but for the losses have accrued or arisen within British India or any Indian State and would, under the provisions of clause (c) of sub-section (2) of section 18, have been exempted from tax, such loss shall not be set off except against profits or gains accruing or arising within British India or any Indian State and exempt from tax under the said provisions. The section only enables an assessee to set off the loss under one head of income against the profit under another head and the proviso also can apply only to such cases. Here, there is only one head of income and, therefore, there is no scope for the application of section 32 (1) or the proviso to that section. It was so held by the Bombay High Court in Commissioner of Income-tax, Bombay v. Murlidhar Mathurawalla Mahajan Association [1948] 16 I.T.R. 146. In Mishrimal Gulabchand's case [1950] 18 I.T.R. 75 relied on by the Department the Allahabad High Court agreed with this view. Referring to the Bombay case, Malik, C.J., said: The learned Judges held that this proviso can have no application unless the section itself is applicable and the proviso does not, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the income-tax is payable. That section must be read along with clause (c) of sub-section (2) of section 14 which exempts the income, profits and gains arising to the assessee within an Indian State, unless such income, profits or gains are received or deemed to be received in British India, or brought into British India in the previous year by or on behalf of the assessee. If such income becomes taxable by reason of the fact that it is received in British India or brought into British India, in the previous year, to my mind, it would become 'an income from other sources' rather than 'an income from business'. Be that as it may, on the facts stated in the statement of the case that the assessee had made a profit of ₹ 38,473 from business in British India and has suffered a loss of ₹ 25,391 from its business in Indian States and on the finding that the first proviso to section 24, sub-section (1), is not applicable and in the view that I have taken that neither sub-section (1) to section 24 nor section 10 of the Act helps the assessee the reply to the first question must be in the affirmative and the loss of ₹ 25,391 should be ignored in determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had made a profit of an equal amount from business there, it must be conceded that in making the computation for tax purposes by reason of the provisions of section 14(2) (c) the Income-tax Officer cannot take the profit into consideration, the amount not being an income which was liable to tax. There is, therefore, no reason why he should, in making the computation for tax purposes, take into account losses incurred at Jaipur. For tax purposes computation of neither the profit nor the loss of Jaipur will be relevant under section 10 of the Act, though for the purpose of determining the rate such income or such loss may be relevant. Reading these sections together the result appears to us to be that in computing the income for rate purposes the Income-tax Officer may have to take into account the profits made in an Indian State and may also have to deduct the losses sustained there, but in computing the income for tax purposes neither the profits made nor the loss incurred in an Indian State can be taken into account...........................Having considered the matter, we see no reason to differ from the opinion expressed by this Court in Mishrimal Gulabchand of Beawar, In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court held as follows: Under section 6 various sources of taxable income are indicated and section 10 provides that the assessee is liable to pay tax upon the head 'profits and gains of business, profession or vocation' in respect of the profits or gains of any business, profession or vocation carried on by him. Under sub-clause (2) of that section such profits or gains have to be computed after making the allowances enumerated in that clause. Nowhere in this section or in section 6 is there any basis for restricting the words 'business, profession or vocation' to business, profession or vocation carried on only in British India and not outside it. In that case, however, the business that was carried on outside the taxable territory was not in an Indian State but was in Ceylon. 9. The Nagpur High Court considered the question in two cases, i.e., Commissioner of Income-tax, Madhya Pradesh v. C.P. Syndicate [1952] 22 I.T.R. 493 and Mohanlal Hiralal v. Commissioner of Income-tax, C.P. Berar [1952] 22 I.T.R. 448. Referring to the observations of Malik, C.J., in Mishrimal Gulabchand In re [1950] 18 I.T.R. 75 the learned Judges observed in Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia. 10. Reference may also be made in this connection to the following observation of Bose, J., in Anglo-French Textile Company Ltd. v. Commissioner of Income-tax, Madras [1953] 23 I.T.R. 82: Next, a set-off under section 24(1) can only be claimed when the loss arises under one head and the profit against which it is sought to be set off arises under a different head. When the two arise under the same head, of course the loss can be deducted but that is done under section 10 and not under section 24(1). See the decision of the Privy Council in Rm. Ar. Ar. Rm. Arunachalam Chettiar v. Commissioner of Income-tax, Madras [1936] 4 I.T.R. 173 at 178 and 179. 11. In Commissioner of Income-tax, Punjab v. Hira Mall Narain Dass [1953] 24 I.T.R. 199, (Punjab High Court), Kapur, J., expressed himself unable to agree with the view taken by the Allahabad High Court in Mishrimal Gulabchand of Beawar, In re [1950] 18 I.T.R. 75, and said that there was no reason why in computing the income under section 10 business carried on by the assessee should be read only as business in British India. After referring to the decisions of the various High Courts on the point the learned Judge c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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