LAWS(MAD)-1959-4-4

UDAYA Vs. COMMISSIONER OF INCOME-TAX MADRAS

Decided On April 23, 1959
UDAYA Appellant
V/S
COMMISSIONER OF INCOME-TAX MADRAS Respondents

JUDGEMENT

(1.) UNDER Section 66 (1) of the Indian Income-tax Act, the Incomers Appellate tribunal of Bombay has referred the following question for the decision of this court: "whether the losses claimed by the assessee for assessment years 1948-49 and 1949-50 require in law to be determined therefore and carried forward to he set off against its assessments for 1950-51 and 1951-52?" the relevant facts are these: The assesses is a private limited company deriving income from three heads or sources, viz. , interest on securities, dividends from companies and its business in shares and stocks. During the year 1948-49, it received Rs. 18000 by way of interest on securities, Rs. 13084 by way of dividends from companies and sustained a loss of Rs. 1,32,607 in its business. During the year 1949-1950 it received Rs. 3000 as interest on securities, Rs. 7795 as dividends from companies and sustained in its business a loss of Rs. 35,252. During the year 1950-51 it derived a net aggregate income of Rs. 13611. We may mention here that there is some discrepancy between the figures set out in the statement of the case submitted by the Tribunal and the figures appearing in an order of the Appellate Assistant Commissioner of Income-tax. The assessee submitted a return of income for the first time only on 29-3-1951 on which date it submitted the returns relating to the years, 1948-49, 1949-50 and 1950-51. In november 1951 the company submitted a fourth return showing the income for the year 1951-52. The total income was then shown as Rs. 34269. The Income-tax Officer accepted the returns filed for the years 1950-51 and 1951-52, but he ignored the returns for the two earlier years 1948-49 and 1949-50. The assesses appears to have claimed before the Income-tax Officer that it was entitled to carry forward the losses which it had incurred in 1948-49 and 1949-50, and set them off against the profits, for the subsequent years. That claim was negatived by the Income-tax officer. He, however, ordered refund of the excess tax deducted at the source under section 48 of the Act. From the order refusing the claim to set off the assessee appealed to the Appellate Assistant Commissioner of Income-tax, who dismissed the appeal. That officer observed:

(2.) THE provisions of the Act that are here relevant are to be found in Section 24 as it stood before it was amended in 1953 and 1955. That section so far as is now material, runs as follows :

(3.) MR. Jagadisa Aiyar, the learned advocate for the peiitioner, argued: The assessee in the present ease had three sources or heads of income within the meaning of Section 6 of the Act, viz. , dividends, interest on securities and business. By virtue of the provisions contained in Sub-section (1) of Section 24, the assessee is entitled to set off the losses under one head against the income or profits from another head. If the entire loss is not thus absorbed Sub-section (2)gives the assessee the right to curry forward the loss from business to another year and set it off against the profits that he might subsequently make. A further limitation on this right of the assessee is that he cannot carry the loss forward for a longer period than six years. Where the assesses has suffered a net loss in a particular year there would be no question of assessing him to tax in respect of that year because his income would have been not merely nil but a negative quantity, in order to enable the assessee to carry forward his loss and set it off against the profits of future years and in order to avoid disputes at a subsequent point of time the assessee is entitled to insist that the Income-tax officer should ascertain this loss. That the returns of the income were filed voluntarily, or, that they were not filed in the year following the account year, are not circumstances that would deprive the assessee of this right of his. The Income-tax Officer was bound to ascertain the losses which the assessee had suffered and set them oft against the profits it had earned in 1950-51 and 1951-52.