MOHAPATRA, J. - This is a reference under section 66(1) of the Indian Income-tax Act, 1922, made by the Income-tax Appellate Tribunal, Madras Bench, in their order dated 16th July, 1954, referring the point of law which runs as follows :
'Whether in the facts and circumstances of the case, the assessee is entitled to the determination of the loss incurred in 1948-49 assessment year and to its set-off against the profits of the assessment year 1949-50.'
2. The assessee is Bonai Industrial Company Limited, a public limited company incorporated in 1939, with its registered officer at Bonaigarh in the former Indian State of Bonai. The assessee-company was constituted with the main object of exploring and prospecting the mineral and forest resources of Bonai State. It is to be noted here that the company had only one source of income, that is to say, by carrying on business in the mineral and the forest resources. There were no mining operations in the account years ending on 31st March, 1947, and 31st March, 1948. The Income-tax Act of 1922 was adopted however by the Bonai State with effect from 1st April, 1944, by a notification of the Durbar of Bonai. In respect of the assessment year 1948-49, the State Income-tax Authorities issued a notice under section 22(2) of the Act, and the assessee-company filed a nil return with a covering letter stating that it suffered a gross loss of Rs. 2,985-3-0 during the previous year. The Bonai State Income-tax Officer however passed the following order :
'On examining the books of account produced by him in support of the retun filed by him, it is found that no profit was accrued to the Bonai Industrial Co., Ltd. in 1947-48. Hence, filed.'
3. It is to be mentioned here that the present assessment year is 1949-50, the accounting year ending on 31st March, 1949. The Bonai State merged in the present State of Orissa under the States Merger (Governors Provinces) Order, 1949. By virtue of the Taxation Laws (Extension to Merged States and Amendment) Act, 1949 (Act No. LXVII of 1949) the Indian Income-tax Act, 1922, was made applicable to all the merged territories with effect from 1st April, 1949. The Income-tax Officer, Jharsuguda, who had jurisdiction over the area formerly known as Bonai State, issued a notice under section 22(2) of the Act on the assessee. The assessee filed a return declaring a loss of Rs. 48,091 for the 'previous year' ending on 31st March, 1949. The authorities however found as a matter of fact that the loss was never proved. The contention on behalf of the assessee before the Tribunal that the Income-tax authorities should set off against the profits of the previous year the loss of earlier years under the provisions of section 24(2) of the Act was therefore negatived.
4. The simple question therefore which arises for determination in the present case and is referred to us is 'whether under section 24(2) of the Indian Income-tax Act, the assessee is entitled to set-off of the loss of the previous years as against the income of the year in question.' The point seems to have been completely set at rest by a decision of their Lordships of the Supreme Court in the case of Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax, Madras. Interpretation of the provisions of sub-sections (1) and (2) of section 24 of the Act arose very pertinently and directly before their Lordships of the Supreme Court who finally decided the point. It is the definite view of their Lordships that sub-section (2) must be read subject to the provisions of sub-section (1) :
'Sub-section (1) provides that where an 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. Therefore, before any question of set off can arise, there must be (1) a loss under one or more of the heads mentioned in section 6, and (2) an income, profit or gain under some other head.'
Their Lordships further observed :
'Next, a set-off under section 24(1) can only be claimed when the loss arises under one head and the profit against which it is sought to be set off arises under a different head. When the two arise under the same head, of course the loss can be deducted but that is done under section 10 and not under section 24(1). See the decision of the Privy Council in Rm. Ar. Ar. Rm. Arunachalam Chettiar v. Commissioner of Income-tax, Madras. In the present case, the loss is computed by striking a balance in the profit and loss account of just the one business and consequently no question of different heads arises. On both these grounds, therefore, the assessees contention must fail because unless the loss can be set off under sub-section (1) of section 24, it cannot be carried forward under sub-section (2) and if it cannot be carried forward the question of its determination and computation becomes irrelevant.'
Section 6 enumerates the following heads of income :
(ii) Interest on securities.
(iii) Income from property.
(iv) Profits and gains of business, profession or vocation.
(v) Income from other sources.
In the present case before us, the assessee has only one source of income, that is, profits and gains of business. The alleged loss also is in respect of the same business, and, as such, the decision of their Lordships of the Supreme Court fully answers the point which arises in the present case, that is to say, that the assessee is not entitled to a set-off of the loss, if any, in the previous years against the profits of the assessment year. Indeed, the provisions of section 24(2) has been subsequently amended by the Parliament to counteract the aforesaid decision of their Lordships of the Supreme Court; but it is conceded by the counsel of both parties that the said amendment is not retrospective and the present case is governed by the provisions of section 24 of the Act which were for interpretation by their Lordships of the Supreme Court.
5. I will further add that in view of the consistent finding of the Income-tax authorities and the Tribunal that the assessee has not been able to prove any loss during the previous years even thought sufficient opportunities were given to him, the determination of the question becomes were given to him, the question becomes academic. But as we have discussed above relying on the decision of their Lordships of the Supreme Court which is absolutely binding on us, we would answer the question in the negative, that is,
'The assessee is not entitled to the determination of the loss incurred in 1948-49 assessment year and to its set-off against the profits of the assessment year 1949-50.'
6. The reference is accordingly answered. Hearing fee is assessed at Rs. 100 (rupees one hundred).
RAO, J. - I agree.
Reference answered accordingly.