The occupation of a Treasurer under an agreement with a Bank, which involves the exercise of skill and judgment in making appointments, supervising staff, and guaranteeing against loss arising to the Bank from the acts or omissions of the staff, may be regarded as a vocation for the purpose of computing income under S. 10 of the Income-tax Act.

Judgement

SHAH, J.: Under an agreement dated January 2, 1931 Lala Manmohan Das-hereinafter called the assessee - was appointed Treasurer of the Allahabad Bank Ltd. in respect of certain Branches, Sub-Agencies and Pay Offices. The assessee was assessed to income-tax as representing his Hindu undivided family, and the income received by the assessee under the terms of the agreement with the Allahabad Bank was treated as income of the Hindu undivided family. In the previous year corresponding to the assessment year 1950-51 the assessee in performing his duties as a Treasurer suffered a net loss of Rs. 38,027/-. For the assessment year 1951-52, the profit and loss account of the assessee showed Rs. 73,815/- as receipts, against which were debited outgoings amounting to Rs. 39,370/- which included Rs. 20,000/- being the loss suffered by the assessee as Treasurer of the Patna Branch of the Allahabad Bank arising from misappropriation by an Assistant Cashier. The Income-tax Officer refused to allow the loss suffered in the previous year to be set off against the net profit of Rs. 34,445/- and brought that amount of profit to tax as remuneration received by the assessee as Treasurer of the Allahabad Bank. The order of the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner. The Income-tax Appellate Tribunal held that the remuneration received by the assessee as Treasurer of the Allahabad Bank was income arising from pursuit of a profession or vocation within the meaning of S. 10 of the Act and the loss suffered during the preceding year was liable to be set off against the assessee s income from that source in the year under consideration.

2. At the instance of the Commissioner of Income-tax, U. P., the following questions were referred to the High Court of Allahabad under S. 66 (1) of the Income-tax Act, 1922:

(1) Whether on a true interpretation of the deed of agreement dated 2nd January, 1931, appointing the assessee as Treasurer of the Allahabad Bank Limited, income earned by the assessee from his activities as such Treasurer fell to be computed under Section 10 of the Act or Section 7 or Section12 of the Income-tax Act?

If the answer to this question is that such income is liable to be computed under Section 10 of the Act.

(2) Whether the assessee could claim a set off of the loss suffered by him in the preceding year 1950-51 against his profits in the year under consideration i. e. 1951-52 having failed to prefer an appeal against the refusal by the Income-tax Officer making the assessment for the year 1950-51 to allow the assessee to carry forward the loss under Section 24 (2) of the Act?

The High Court held that the remuneration received by the assessee from the Allahabad Bank was income liable to be taxed under S. 10 of the Income-tax Act, and that the assessee could claim to set off the loss computed in the assessment year 1950-51 against the profit in the subsequent year. With certificate granted by the High Court, this appeal has been preferred by the Commissioner of Income-tax.

3. The Second question presents little difficulty. In making his order of assessment for the year 1950-51 the Income-tax Officer declared that the loss computed in that year could not be carried forward to the next year under S. 24 (2) of the Income-tax Act, as it was not a business loss. The Income-tax Officer has under S. 24 (3) to notify to the assessee the amount of loss as computed by him, if it is established in the course of assessment of the total income that the assessee has suffered loss of profits. Section 24 (2) confers a statutory right (subject to certain conditions which are not material) upon the assessee who sustains a loss of profits in any year in any business, profession or vocation to carry forward the loss as is not set off under sub-s. (1) to the following year, and to set it off against his profits and gains, if any, from the same business, profession or vocation for that year. Whether the loss of