COMMISSIONER OF INCOME-TAX Vs. MURLIDHAR MATHURAWALA

JUDGEMENT

(1.) The assessee was carrying on two distinct and separate businesses, one in Bombay and the other at Indore. During the year of account there was profit in the Bombay business, but the business at Indore resulted in a loss amounting to Rs. 1,55,583. The assessee claimed that this loss should be set off against the profits realised in the Bombay business. The view taken by the Income-tax Officer and the Appellate Assistant Commissioner was that the assessee's claim was not sustainable in view of the first proviso to Section 24. The Tribunal differed from the view taken by the Income-tax Officer and the Appellate Assistant Commissioner and came to the conclusion that the assessee was entitled to set off the loss suffered by him in the Indore business against the profits of the Bombay business.

(2.) Now, the assessee is a person resident in British India, and under Section 4(b)(ii) in his total income he would have to show not only the income which accrued or arose to him in British India but also the income which accrued or arose to him without British India, and, therefore, his income not only in the Bombay business but also in the Indore business would have to be shown in his return. Section 14 contains provisions which are in the nature of exemptions of a general nature and Sub-clause (c) of that section exempts from tax all income, profits or gains which accrue to an assessee within an Indian State unless such income, profits or gains are received or deemed to be received in or are brought into British India in the previous year by or on behalf of the assessee under Section 42.

(3.) The Advocate General's contention is that inasmuch as an assessee is not liable to pay tax on the income which accrues to him in an Indian State unless he brings it into British India or is deemed to have brought it 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, and for that purpose reliance is placed on the proviso to Section 24(1) of the Act. The main section says this: Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in Section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year.