SOORAJMULL NAGARMULL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1964-65, the following question of law has been referred to this court:

(2.) The facts leading to this reference are in a narrow compass. The assessee is a partnership firm which has been assessed in the status of an unregistered firm for the assessment year 1964-65. A long-term capital loss of Rs. 7,57,320 was assessed for the assessment year 1959-60, under Section 143(3) of the Income-tax Act, 1961. Before the Income-tax Officer, the assessee claimed that this loss should be set off against the long-term capital gains of Rs. 2,67,222 assessed in the assessment year 1964-65. The Income-tax Officer was of the view that the long-term capital loss having been determined in terms of the assessment made under the Income-tax Act, 1961, the time-limit for set off is governed by Section 74(2)(b) of that Act according to which long-term capital loss can be carried forward only for a period of four years. He, therefore, held that the assessment year 1964-65 being outside the time-limit, the long-term capital loss of the assessment year 1959-60 cannot be set off against the long-term capital gains assessed for the assessment year 1964-65.

(3.) Against the assessment order, the assessee appealed to the Commissioner of Income-tax (Appeals) who upheld the order of the Income-tax Officer on the point. The assessee then came up in further appeal before the Tribunal against the order of the Commissioner of Income-tax (Appeals). The Tribunal noted in its order that the question of carry forward of long-term capital loss of Rs. 7,57,320 and set off against the capital loss is not in dispute. What is in dispute is whether it can be carried forward up to the period of four assessment years or eight assessment years. The gap between the assessment years 1959-60 and 1964-65 is less than eight years but more than four years.