COMMISSIONER OF INCOME TAX Vs. BALIRAM SANTHOBA

JUDGEMENT

(1.) THIS is a reference by the Tribunal at the instance of the CIT, Hyderabad, under s. 82(1) of the Hyderabad IT Act, (VIII of 1357 F). The assessee is an HUF having its place of business in Hyderabad and carrying on various businesses such as kirana, cloth, speculation, etc. It also carries on business outside Hyderabad in Bombay. For the assessment year 1358 F the assessee suffered a loss of Rs. 69,700 in its Bombay business. It was contended before the Tribunal that the net figure of loss was Rs. 51,671 and not Rs. 69,700 inasmuch as the Bombay profit of Rs. 18,029 had been separately included in the local profits of the assessee and further the Bombay gross loss and not the net loss had been added back. The IT Department, however, did not dispute the direction for setting off of Rs. 18,029 as against Rs. 69,700 but disputed the Tribunal's decision with respect to the net amount of Rs. 51,671. In these circumstances, the question that has been referred to us by the Tribunal is - -

(2.) THE assessee contended before the Tribunal in regard to the loss referred to above that it should have been allowed to be set off against the profits in Hyderabad, in view of the decision in CIT vs. Murlidhar Mathurawala (1948) 16 ITR 146 (Bom) : TC45R.53, or alternatively to reckon this loss for the purpose of fixing the rate at which other income is liable to tax. The Department relied upon the case of Mishrimal Gulabchand of Beawar, In re (1950) 18 ITR 75 (All). The Tribunal, however, followed the Bombay decision of CIT vs. Murlidhar Mathurawala (supra) and directed the ITO to allow the assessee's claim for set off of the Bombay loss against Hyderabad income and, in these circumstances, it did not consider it necessary to decide the alternative contention.

(3.) EVEN before us, the same contention has been raised, viz., whether the assessee should be allowed to set off the Bombay loss against the income of Hyderabad business. In the case of CIT vs. Murlidhar Mathurawala (supra), Chagla, C.J., and Tendolkar, J., held that losses incurred in Indore by the assessee who was a resident in British India and carrying on two distinct had separate businesses, could be set off against profits of the business at Bombay. Chagla, C.J., meeting the arguments of the Advocate -General, viz., that inasmuch as the assessee is not liable to pay tax on the income which accrues to him in the Indian State unless he brings it into British India or deemed to have been brought into British India, the Act does not permit an assessee to set off a loss incurred by him in a business carried on by him in an Indian State against the profits earned by him in British India, observed :