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High Court Of Calcutta
S.P. Mitra, A.N. Sen, JJ.
Reliance Jute Mills Co. Ltd. – Appellant
Versus
Commissioner Of Income Tax – Respondent
IT Ref. No. 120 of 1969
Decided On: March 25, 1971
INCOME TAX - Loss - Set-off - Amendment of s. 24(2) of the IT Act by the Finance Act of 1957 - Retrospective effect - Whether unabsorbed loss of 1950-51 could be set-off against business income of 1960-61 - Held, no.
Fact of the Case:
The assessee, a company carrying on business in the manufacture of jute goods, sustained losses in the assessment years 1956-57, 1957-58, and 1950-51. The ITO set off the unabsorbed losses of 1956-57 and 1957-58 against the business income of 1960-61. The assessee claimed that the unabsorbed loss of 1950-51 should also be set off against the business income of 1960-61, as the ITO had directed in the assessment order for 1959-60 that the said loss be carried forward for subsequent years.
Finding of the Court:
The Tribunal held that the assessee was not entitled to set off the unabsorbed loss of 1950-51 against the business income of 1960-61, as the amendment of s. 24(2) of the IT Act by the Finance Act of 1957 restricted the assessee's right to carry forward losses for not more than 8 years.
Issues: Whether the assessee was entitled in law to set-off unabsorbed loss of Rs. 15,50,187 of the asst. yr. 1950-51 against the business income of the asst. yr. 1960-61 ?
Ratio Decidendi: The law applicable to a particular assessment year is the law as it stands on the 1st of April of that assessment year. The amendments introduced by the Finance Act of 1957 into the relevant provisions of s. 24(2) of the IT Act, 1922, had to be invoked when the ITO made the assessment for the asst. yr. 1960-61. These are not cases of retrospective operation of statutes affecting vested or substantive rights but only matters of construction of relevant legislative provisions.
Final Decision: The assessee's appeal was dismissed.
Sankar Prasad Mitra, J.
1. THIS is a reference under s. 66(1) of the Indian IT Act, 1922. The statement of the case relates to the asst. yr. 1960-61. The relevant accounting period is the financial year ending March 31, 1960. The assessee is a company which has been carrying on business, inter alia, in the manufacture of jute goods. The assessee's business income was finally determined by the Tribunal's order of October 27, 1964, at Rs. 23,93,166. While giving effect to the Tribunal's order the ITO set-off the unabsorbed losses of 1956-57 and 1957-58 of Rs. 3,24,849 and Rs. 20,68,317, respectively against the aforesaid business income.
2. TO the AAC the assessee pointed out that the total loss determined for the asst. yr. 1956-57 was Rs. 10,54,686 and not Rs. 3,24,849 as taken by the ITO. The AAC, after verifying the figures, directed the ITO to modify the assessment and the ITO did so accordingly. The next point raised before the AAC was regarding the set-off of losses. On behalf of the assessee it was submitted that, in the asst. yr. 1950-51, the total loss was Rs. 21,21,141, out of which in the assessment order dated April 26, 1960, for the asst. yr. 1959-60, the ITO had set-off unabsorbed loss of Rs. 1,58,845 for 1949-50 and Rs. 5,70,952 for 1950-51 against the business income of that year. It was urged that in this order the ITO had directed that the balance of unabsorbed loss for 1950-51 amounting to Rs. 15,50,187 should be carried forward for the subsequent year. On the basis of the said order, which, according to the assessee, had become final, these losses which have been directed to be carried forward by the ITO in respect of the asst. yr. 1950-51 should also have been set-off against the current year's business income. The AAC held that the losses could not be carried forward for more than 8 years.
Before we proceed any further it would be convenient to set out some of the provisions of the relevant statutes. Sec. 24(2) of the Indian IT Act, 1922, prior to its amendment by the Finance Act of 1955, was as follows :
"(2) Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March, 1940, in any business, profession or vocation, and the loss cannot be wholly set-off under sub-s. (1), so much of the loss as is not so set-off or the whole loss where the assessee had no other head of income shall be carried forward to the following year and set-off against the profits and gains, if any, of the assessee from the same business, profession or vocation for that year ; and if it cannot be wholly so set-off, the amount of loss not so set-off shall be carried forward to the following year, and so on, but no loss shall be so carried forward for more than six years, and a loss arising in the previous years for the assessment for the year ending on the 31st day of March, 1940, the 31st day of March, 1941, the 31st day of March, 1942, the 31st day of March, 1943 and the 31st day of March, 1944, respectively, shall be carried forward only for one, two, three, four and five years, respectively."
3. LATER on, the following amendment was made in the aforesaid sub- section by s. 16 of the Finance Act, 1955 :
"16. Amendment of s. 24, Act XI of 1922.--In sub-s. (2) of s. 24 of the IT Act,- (1) for the words beginning with 'where any assessee sustains a loss of profits' and ending with 'three, four and five years, respectively', the following shall be substituted, namely :-- 'Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March, 1940, in any business, profession or vocation, and the loss cannot be wholly set-off under sub-s. (1), so much of the loss as is not so set-off or the whole loss where the assessee had no other head of income shall be carried forward to the following
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