COMMISSIONER OF INCOME TAX MYSORE TRAVANCORE COCHIN AND COORG BANGALORE COMMISSIONER OF INCOME TAX BANGALORE Vs. INDO MERCANTILE BANK LIMITED PANGAL VITTAL NAYAK AND CO LIMITED

JUDGEMENT

(1.) THE following Judgment of the court was delivered by

(2.) THESE two appeals by special leave raise a common question of law, and that is, whether business losses incurred in the erstwhile State of Cochin could, under the Income-tax Act of Travancore, be set off against the business profits made in the erstwhile State of Travancore. In Appeal No. 260/ 58 a further question arose whether in the case of that assessee the year ending 30/06/1949, was the previous year for the assessment year 1950-51 with the result that it should be assessed under the Indian Income- tax Act of 1922. But this question was not answered by the High court which confined itself to answering the first question which was common to both the appeals. The appellant before us in both the appeals is the Commissioner of Income-tax and the respondents are the two assessees, in one case a Bank and the other a private limited company. The main argument has been confined to the question of applicability of s. 32(1) and the first proviso to that section of the Travancore Income-tax Act (hereinafter called the Travancore Act).

(3.) IT was argued on behalf of the Revenue that this proviso falls in the second category and takes the present cases out of s. 32(1) of the Travancore Act and imposes a liability to tax on the profits or gains arising in that State, disallowing a deduction of the losses in British India and in States other than Travancore State against profits made in Travancore State: Rhondda Urban council v. Taff Vale Railway (1) and Harrison v. Ward (2). IT may be mentioned that in the majority of cases decided in India the proviso to s. 24(1) of the Indian Act has been construed in a manner contrary to the submissions made on behalf of the Revenue.