Judgment

HIDAYATULLAH, J. :The Commissioner of Income-tax, Kerala and Coimbatore, has filed this appeal against the judgment and order of the High Court of Kerala dated October 31, 1958,* by which the High Court answered in favour of the respondent (Helen Rubber Industries, Ltd., Kottayam) the following question :

"Whether under the provisions of the Indian Income-tax Act the petitioner is entitled to carry forward the loss for a period of six years notwithstanding the act that during the period when the loss had occurred, the law applicable was the Travancore Income-tax Act ?"

The High Court has granted a certificate under S. 66A(2) of the Income-tax Act. Two questions were referred to the High Court in compliance with an earlier order of the High Court under S. 66 (2); but with the other question, we are not concerned in this appeal.

2. Messrs. Helen Rubber industries; Ltd. is a Company, which was incorporated in the former State of Travancore with its registered office at Kottayam. In the year 1941, the assessee Company granted a lease of the factory to certain persons for a period of 15 years. From that year, the rent and royalty received from the lessees were the only source of income. Disputes having arisen, the lessees suspended payment from June 1946. Litigation followed; but the dispute was settled by the assessed Company receiving Rs. 23,000/- odd in full satisfaction. With the details of these disputes and their settlement, we are not concerned. The year of account of the assessee Company is the Calendar year. Before the extension of the Indian Income-tax Act, there was in force in Travancore State, the Travancore Income-tax Act, 1121 M. E. (Act XXIII of 1121 M. E.) which came into force on the first day of Chingom 1122 M. E. (August 17, 1946). The assessment year under the Travancore Act ended on the last day of Karkadakom, which corresponds to August 16, 1947 Thus, for the account year, 1-1- 1946 to 31-12-1946 of the firm, the assessment year was 1123 M. E. (17-8-1947 to 16-8-1948).

3. The assessee Company declared losses in the account years, 1946, 1947 and 1948. These losses, together with the dates of the account years and the assessment years are tabulated below :

Year of account Year of assessment Loss

1946 (1-1-1946) to 31-12-1946) l123 M. E. (17-8-1947 to 16-8-1948) Rs. 4031-10-0

1947 (1-1-1947 to 31-12-1947) 1124 M. E. (17-8-1948 to 16-8-1949) Rs. 6605- 1-6

1948 (1-1-1948 to 31-12-1948) 1125 M. E. (17-8-1949 to 16-8-1950) Rs. 2604-18-9

Total Rs.13,241- 9-3

4. The dispute in this case is about the right of the assessee Company to carry forward the loss of the year 1946 under the provisions of the Travancore Act read with S. 24 (2) of the Indian Income-tax Act and the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, to the assessment year, 1951-52, in the assessment of the Company for its year of account, the Calendar Year, 1950. The Income-tax Officer held that the loss of the year 1946 could not be carried forward to that year, since it had lapsed after two years under S. 32 of the Travancore Act, and S. 24(2) was not applicable, in view of paragraph 3 of the Order mentioned above. The order of the Income-tax Officer was confirmed in appeal by the Appellante Assistant Commissioner and the Appellate Tribunal. The Tribunal was moved for a case, but declined to state one ; but the High Court called for statement of the case under S. 66(2) and the abovementioned question was decided in favour of the assessee Company. The only question argued in this appeal is whether the High Court was right in the answer it gave. The assessee Company was not represented at the hearing before this Court.

5. The Indian Income-tax Act was extended to Travancore-Cochin by S. 3 of the Indian Finance Act, 1950. By S 13(1) of the same Act, it was provided :

"If immediately before the 1st day of April, 1950, there is in force in any Part B State...............any law relating to income-tax.................that law shall c