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TMI Blog1952 (4) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... nor the appellate order of the Tribunal specifies any of them. Since the first proviso disallows set-off of loss and since that proviso was specifically considered in the decision relied on by the Appellate Tribunal, we take it that the first proviso was intended. The question is otherwise not happily worded. The words having regard to should have appeared in place of under in this question. In order to bring out the true meaning we reframe the question thus :- Whether on the facts of the case the loss of ₹ 76,973 suffered by the assessee in the Indian State could be set off against the profits accruing or arising in British India, having regard to the first proviso to Section 24(1) of the Indian Income-tax Act ? 3. The last portion of the second question, viz., in spite of the fact that no income, profits or gains from the Indian State had been received in British India is not borne out by the statement of the case; nor has it any basis on the record. As is apparent from the order of the Income-tax Officer for the assessment year in question, a sum of ₹ 29,352 was added as income from the Indian State brought into British India. This amount was included in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be charged at the rate specified in Part I of Schedule II and rates of super-tax are also provided for, and by sub-section (3) it is provided that for the purposes of this section and of Schedule II, the expression total income means total income as determined for the purposes of income-tax or super-tax, as the case may be, in accordance with the provisions of the Indian Income-tax Act, 1922'. This can only refer to the Indian Finance Act, 1939, and necessarily includes the alterations made by the Amending Act, which had already come into force on the April 1, 1939. The assessment for the year 1944-45 must therefore be made according to the Indian Income-tax Act in force on April 1, 1944. The first proviso therefore does not apply to the assessment for that year. See also Mishrimal Gulabchand of Beawar, In re. 6. Section 24(1) and its first proviso run thus :- 24(1) Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in Section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year: Provided that, where the loss sustained is a loss of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore follows that the assessee is entitled to set off the loss if this section is applicable. As the first proviso is not applicable to the assessment year in question, the assessee is entitled to set off the loss of ₹ 76,973 against the profits accruing or arising in British India. 9. In our view this assumption is unwarranted. The income of which loss is claimed is income from business. Different businesses do not constitute different heads under the Act. Section 10 which deals with income from business is self-contained. Profits of all businesses after deducting the allowances permissible under the section constitute profits of the assessee from business. In computing profits the losses have got to be taken into consideration. This has been recognized in Murlidhar Mathurawallas case relied on by the Appellate Tribunal. 10. The first question was thus based on two assumption which are unwarranted and does not arise on the facts of the case. 11. Our answer to the second question is in the affirmative. The provisions of the Indian Income-tax Act which are relevant for the consideration of this question are :- Section 4(1) : Subject to the provisions of this Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income b from payment of tax, so the resident will have to pay income-tax on a+c at the rate of tax payable on a+b+c. In the event of loss in an Indian State, the total income computed under the Act will be a-b+c and the tax will be paid on this amount as there are no income, gains or profits to which Section 14(2)(c) would apply. If in any year c is not brought into British India, it will be excluded from consideration. Receipt or non-receipt of c does not affect the result. The assessee in the instant case is therefore entitled to deduct the loss suffered by him in an Indian State in the computation of the total income and this will be taxable income as there is no exemption under Section 14(2)(c). 13. In Income-tax Appellate Tribunal, Bombay v. Central Provinces and Berar Provincial Co-operative Bank Ltd., Nagpur, the effect of exemptions under the first and second provisos to Section 8 was considered. The Bank earned an income, say a, from tax-free securities and income b from taxable securities. To earn this whole income the Bank had to pay interest on moneys borrowed, say c. The Income-tax authorities arbitrarily distributed interest paid into c1 in respect of tax-free s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the business cannot be deducted either.(p. 81). The assumption underlying these observations is that the income from business in an Indian State is to be excluded for all purposes in view of Section 14(2)(c). With the greatest respect we observe that this is a misapprehension probably due to the fact that the attention of the learned Chief Justice was not drawn to Section 4(1) and Section 16(1)(a) of the Act which provide for the inclusion of such income in the total income of the assessee. The learned Chief Justice was probably influenced in his decision by Section 17(1) which is applicable to non-residents while the assessee before him was resident and an ordinary resident of British India. The learned Chief Justice therefore observed that Section 10 would not help the assessee. The learned Counsel also brought to our notice the following further observations of the learned Chief Justice :- Section 10, therefore, primarily concerns itself with the income of the assessee in respect of which the income-tax is payable. Prior to the addition of Section 14(2)(c) in the year 1941, the tax was payable by a resident on his total income which included the income, profits and g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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