Judgment

S. K. DAS, J. : This is an appeal on a certificate of fitness granted by the High Court. of Bombay, and the short question for decision is the true scope and effect of the third proviso to S. 5 of the Business Profits Tax Act, 1947 (Act No. XXI of 1947), hereinafter referred to as the Act. The appellant is the Commissioner of Income-tax, Ahmedabad and the respondent is a private limited company under the name and style of Karamchand Premchand Ltd., Ahmedabad, to be called hereinafter as the assessee.

2. The relevant facts are these : the assessee held the managing agency of the Ahmedabad Manufacturing and Calico Printing Co. Ltd. It also had a pharmaceutical business in the Baroda State, which was at the relevant time an Indian State run in the name and style of Sarabhai Chemicals. The assessee s business in India (we shall use the expression India in this judgment to mean British India as it was then called in contradistinction to an Indian State) showed business profits assessable under the provisions of the Act; but the business carried on in the name and style of Sarabhai Chemicals in Baroda showed a loss in the relevant chargeable accounting periods which were four in n