Sabyasachi Mukharji, J.
1. This reference relates to the assessment made on the assessee, a firm, for the assessment year 1949-50. The relevant accounting year is R. N. 2005 corresponding to the period 18th April, 1948, to 7th April, 1949. The assessee is a firm, as mentioned hereinbefore. During the relevant accounting year, the assessee had carried on several businesses, some in taxable territories and others in Indian States. In the Indian States, other than the Jaipur State, the assessee had earned a total profit of Rs. 3,01,792. It has been mentioned by the Tribunal that the amount has been wrongly mentioned in the Tribunal's order as Rs. 3,01,798. In the Jaipur State, however, the assessee had suffered a loss of Rs. 1,24,132. In the Indian States, taken together, the assessee had earned a net income of Rs. 1,77,660. In computing the total income of the assessee, the ITO had excluded this net income of Rs. 1,77,660 only as being exempt under Section 14(2)(c) of the I.T. Act, 1922. From the ITO's order, it is not clear whether the assessee had claimed that the amount exempt in terms of Section 14(2)(c) of the Act was Rs. 3,01,792 and not the amount of Rs. 1,77,660, the loss of Rs, 1,24,132 having to be set off against other business income earned in the taxable territories in computation of the income under the head ' Profits and gains of business, profession or vocation ' under Section 10(1) of the Act. The assessee went up in appeal before the AAC. Before the AAC, a specific claim for exemption of the amount of Rs. 3,01,792 was made and it was contended that the loss of Rs. 1,24,132 had to be separately considered and allowed as deduction in cornputing the income under Section 10 of the Act. The AAC rejected this contention. There was an appeal to the Tribunal. The Tribunal held that under Section 14(2)(c) of the Act what was exempt was the amount of Rs. 3,01,792 and the loss of Rs. 1,24,132 was to be set off in computing the income under the head 'Business' arising within the taxable territories under Section 10(1) of the Act and, therefore, allowed the assessee's appeal.
2. On an application being made by the revenue, the Tribunal has referred under Section 66(1) of the Indian I.T. Act, 1922, the following question :
' Whether, on the facts and in the circumstances of the case, the loss of Rs. 1,24,132 arising in the Jaipur State was to be deducted from the profit of Rs. 3,01,792 arising in other Indian States, and only the net amount of Rs. 1,77,660 was exempt under Section 14(2)(c) read with the first proviso to Section 24(1) of the Indian I.T. Act, 1922 '
3. Before the merits of the contentions urged on behalf of the revenue in support of this reference are considered, it may be relevant to refer to the relevant provision of Section 14,' as it stood, at the relevant time. Section 14(2) provided as follows :
' Section 14. Exemptions of a general nature :...,..
(2) The tax shall not be payable by an assessee--......
(c) In respect of any income, profits or gains accruing or arising to him within an Indian State unless such income, profits or gains are received or deemed to be received in or are brought into British India in the previous year by or on behalf of the assessee, or are assessable under Section 12B or Section 42.'
4. Section 24 which dealt with the set-off of loss in computing aggregate income was to the following effect :
'Section 24. Sft off of loss in computing aggregate income--
(1) Where any 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 :
Provided that, where the loss sustained is a loss of profits or gains which would but for the loss have accrued or arisen within an Indian State and would, under the provisions of Clause (c) of Sub-section (2) of Section 14 have been exempted from tax, such loss shall not be set off except against profits or gains accruing or arising within an Indian State and exempt from tax under the said provisions. '
5. It has to be borne in mind that Section 24(1) provided for set off of loss under one head against the profits and gains under another head. But where there were profits and losses falling under the same head, as was the case here, they could not be dealt with separately and, as such, Section 24(1) did not come into play at all. In the instant case, it is indisputable that the profits and losses, with which we are concerned, had arisen under the same head and such profits and losses fell under the business income which had to be computed under Section 10(1) of the Act. Section 14(2)(c), which we have noticed, provided, for exemption from tax on income and profits and gains arising in the Indian States and in that section there was no reservation. In thisconnection, emphasis may be laid on the use of the expression ' any ' in Sub-clause (c) of Sub-section (2) of Section 14 of the Act. The entirety of the income arising as profits and gains in the business has been made exempt under Clause (c) of Sub-section (2) of Section 14 because the said sub-clause in the said section provides that no tax shall be payable in respect of any income or gain accruing or arising to him within an Indian State. We are excluding the other exemptions with which we were not concerned in this reference. If that is the position, then, on the construction of the section as applied to the facts of this case, it would be clear that what was excluded under Clause (c) of Sub-section (2) of Section 14 was the sum of Rs. 3,01,792 and not the only reduced sum of Rs. 1,77,660 after setting off the loss of Rs. 1,24,132. Indeed, as we have noticed before, there was no scope for setting off of the loss against the income because the income of Rs. 3,01,792 had arisen or accrued from the same head. On behalf of the revenue, however, it was sought to be argued that the later proviso to Section 24(1) requires speculation losses being seggregated and being allowed only against speculation profits and not against profits of other business. Similarly, loss in an Indian State could be set off only against the profits of an Indian State. In the case of CIT v. Indo-Mercantile Batik Ltd. : 36ITR1(SC) , the Supreme Court had occasion to examine the purpose of the proviso to Section 24. The Supreme Court observed that Section 24(1) of the Indian I.T. Act, 1922, which corresponds to Section 32(1) of the Travancore Act with which the Supreme Court was dealing, was meant for a set-off of profits arising under different heads. Where profits and losses to be adjusted arose under the same head, Section 24(1) or the proviso (i) to Section 32(1) of the Travancore Act could not apply. The Supreme Court, further, observed that in the proviso (i) to Sub-section (1) of Section 24 corresponding to proviso (i) to Section 32(1) of the Travancore Act, there were no positive words which would support an interpretation in favour of the disintegration of the head ' Business ' and compel the application of the proviso to the same head specially keeping in view the object of the main section, viz., Section 24(1), which was to set off loss of profits or gains under one head against income, profits o.r gains under any qther head. The mere use of the words ' loss of profits or gains to be set off against profits in the proviso to Section 24 would not be sufficient to restrict the scope of the proviso to the profits and losses arising under the head 'Business' in the two territories, that is, British India and the Indian States. The proper function of a proviso, according to the Supreme Court, was that it qualified the generality of the main enactment by providing an exception and taking out as it were, from tbe main enactment, a portion .which, but for the proviso, would fall within the main enactment. Ordinarily, it was foreign to the proper function of a proviso to read it as providing something by way of an addendum or dealing with a subject which was foreign to the main enactment. The territory of aproviso, therefore, was to carve out an exception to the main enactment and exclude something which otherwise would have been within the section. It had to operate in the same field and if the language of the main enactment was clear it could not be used for the purpose of interpreting the main enactment or to exclude by implication what the enactment clearly said unless the words of the proviso were such that that was its necessary effect. So far as this case is concerned, the aforesaid observations of the Supreme Court, in our opinion, concludes the matter.
6. But counsel for the revenue sought to rely on the observations of the Supreme Court in : 36ITR1(SC) which stated that as the profits or gains of business in an Indian State were exempted from payment of tax in British India, ' business ' referred to in Section 10 was not confined to business in British India. That would be straining the language of Section 10 and would, according to the Supreme Court, necessitate addition of words in Section 10 which are not there in the section. It was urged that in computing the profits of the business under Section 10, the loss in other parts should be excluded. But it has been found that the total profit was Rs. 3,01,792 in the Indian States and the entirety of that profit irrespective of any diminution on account of the loss suffered in the Jaipur State would be exempt under Section 14(2)(c) because of the use of the expression ' any ' in the section. Whether the total profit of Rs. 3,01,792 computed as arising in the Indian States has been correctly made or not under Section 10 of the Act is not the question before us, nor was the Tribunal concerned with the same. If that is the position, then, in our opinion, the Tribunal was right in arriving at the conclusion that it did.
7. In the aforesaid view of the matter, the question referred has to be answered in the negative and in favour of the assessee. There will, however, be no order as to costs.
Sudhindra Mohan Guha, J.
8. I agree.