ABIDA KHATOON SMT Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE three cases may be disposed of by a common order as the questions raised are identical. It is sufficient if the facts pertaining to R.C. No. 29/1970 are stated. Abida Khatoon, the assessee concerned in R.C. No. 29/1970, owns a fourteen annas share in M/s. Hyderabad Deccan Cigarette Factory and Salima Khatoon, the assessee concerned in R.C. No. 30 of 1970, owns the remaining two annas share. The Hyderabad Deccan Cigarette Factory was being assessed to income-tax as an association of persons. During the accounting year corresponding to the assessment in year 1966-67 the Hyderabad Deccan Cigarette Factory incurred a loss. Abida Khatoon's share of the loss was Rs. 81,107. She claimed to set off this loss under the head " Business " against her other income of Rs. 37,682 derived from other sources under the heads " Income from house property " and " Income from securities ". Her claim for a set-off was rejected by the Income-tax Officer, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The question now is whether she is entitled to the set-off claimed by her.

(2.) NOW, Section 4 of the Income-tax Act, 1961, enacts that, subject to the other provisions of the Act, income-tax shall be charged in respect of the total income of the previous year of every person. Total income is defined by Section 2(45) as meaning the total amount of income referred to in Section 5 and computed in the manner laid down in the Act. Broadly, Section 5 includes in the total income of a resident all income from whatever source derived which is received or is deemed to be received by him or which accrues or is deemed to accrue to him, etc. Chapter III of the Income-tax Act deals with incomes which do not form part of total income. It is sufficient to say here that income received by a person as his share from an association of persons is not included in Chapter III and, therefore, if is not to be excluded from the person's total income. Chapter IV deals with computation of total income. For the purposes of charge of income-tax and computation of total income, Section 14 (which occurs in Chapter IV) classifies all income under six heads : A.--Salaries, B.--Interest on securities, C.--Income from house property, D.--Profits and gains of business or profession, E.--Capital gains and F.--Income from other sources. Sections 15 to 59 prescribe the rules for the computation of income under each head of income. It has been succinctly stated by the Supreme Court in K. S. Venkataraman and Co. (P.) Ltd. v. State of Madras, that Section 4 charges total income. Section 5 defines its range. Section 14 classifies it. Sections 15 to 59 quantify it. It is elementary that the classification of all income under six heads does not have the effect of making the income under each head separately liable to tax. Income-tax is a single tax on the total income and not a collection of distinct taxes on-the incomes under the several heads or on the incomes from different sources. Vide Karanpura Development Co. Ltd. v. Commissioner of Income-tax, . Since the charge of tax is on the total income, a natural corollary of the principle that income-tax is a a single tax and not a collection of taxes is that a loss from a source under any head in a year may be set off against income from- another source under the same head in that year and so also a loss under any head in a year may be set off against the income under any other head in that year. These are expressly provided by Sections 70(1) and 71(1) of the Income-tax Act respectively. We will refer to these provisions presently in our order.

(3.) IN the INcome-tax Act of 1922, as it stood before 1939, there was no provision corresponding to Section 70(1) of the Act of 1961, but there was a provision corresponding to Section 71(1) of the 1961 Act. Section 24(1) of the INdian INcome-tax Act of 1922, as it stood prior to 1939, was as follows: