Civil Appeals Nos
27l6 27l8 of 1972 Appeals by Special Leave from the Judgment and Order dated the 14 7 1972 of the Kerala High Court in income Tax Reference Nos 100 101 and 102 of 1970 WITH CIVIL APPEAL NOS
365 367 of 1978
From the Judgment and order dated the 24th May 1977 of the Kerala High Court in ITR Nos
55 56 and 57 of 1975 J L Nain and Mrs Saroja Gopalakrishnan for the Appellant in all the appeals
P J Francis section P Nayar and Miss A Subhashini for Respondent in all the appeals
The Judgment of the Court was delivered by UNTWALIA J
These six appeals have been heard together as a common question of law in relation to the assessment of the same assessee arises in them
Civil Appeals 2716 2718 of 1972 relate to the assessment years 1964 65 1965 66 and 1966 67
The assessee appellant is a registered firm carrying on business at several places in the State of Kerala
Apart from its regular trade ill various commodities the assessee was also carrying on a business in speculation
Apropos the speculation business of the assessee the Income Tax officer determined a loss of Rs 40510  a loss of Rs 598 and a profit of Rs 136264 for the assessment years 1964 65 1965 66 and 1966 67 respectively
In apportioning the assessee s income amongst its partners under section 67 of the Income Tax Act 1961 hereinafter referred to as the Act he also apportioned the losses in speculation business in 1273 the two assessment years 1964 65 and 1965 66
The profit in speculation business as computed for the assessment year 1966 67 was also apportioned by the Income Tax officer amongst the partners
The assessee contended before the Income Tax officer that the losses in the speculation business could not be apportioned between the partners but should be carried forward and set off against the profit in the said business made in the assessment year 1966 67
The Income Tax Officer rejected this contention
But the Appellate Assistant Commissioner in appeal following the decision of this Court in Commissioner of Income Tax Gujarat vs Kantilal Nathuchand Samt accepted the assessee s stand
The department took the matter in second appeal before the Income Tax Appellate Tribunal
The Tribunal pointed out the distinction between the provisions of section 24 of the Income Tax Act 1922 under which the case of Kantilal Nathuchand supra had been decided and those of sections 73 and 75 of the 1961 Act
It therefore allowed the department s appeal
On being asked by the assessee to state a case and make a reference to the High Court the Tribunal referred the following question of law for its opinion Whether on the facts and in the circumstances of the case and on a true interpretation of the various provisions of the Income tax Act 1961 the Tribunal was correct in holding that a registered firm was not entitled to have its losses in speculation business carried forward for set off against future profits in speculation business The High Court of Kerala on a consideration of the relevant provisions of the Act contained in Chapter VI has answered the reference in favour of the Revenue and against the assessee
The decision of the High Court is reported in MD Kevasia  Co vs Commissioner of Income Tax Kerala
Civil Appeals 2716 to 2718 of 1972 have been filed in this Court by special leave
Identical questions arose in respect of the assessment years 1967 68 1968 69 and 1969 70
The High Court answered the references made in respect of those three years also against the assessee by its judgment and order dated the 24th May 1977
Civil Appeals 365 to 367 of 1978 have been preferred from the said decision of the High Court
1274 In the case of Kantilal Nathuchand supra the question for con sideration was whether on a true interpretation of the various provisions of the Indian Income Tax Act 1922 speculation losses of the assessee firm for the assessment years 1958 59 and 1959 60 should be set off against its speculation profit in its assessment for the assessment year 1960 61
The provisions contained in section 2 1 and the two provisos appended thereto were not very clear and some apparent conflict arose between the first and the second proviso
On a consideration of the same this Court held that speculation losses of a registered firm kept apart under the first proviso to section 241 in computing its total income for one year could not be apportioned between the partners and the registered firm could claim to carry for ward such
losses and have it set off against speculation profits of the firm of a later year in accordance with section 242
But the provisions of law contained in Chapter VI of the Act have made a considerable departure from the corresponding provisions of the 1922 Act
In these cases we are only concerned with the question of set off of speculation losses against the profits of a other speculation business
In this connection it would suffice to read only the relevant provisions of sections 73 and 75 as they stood at the relevant time
They are as follows 73
Losses in speculation business 1 Any loss computed in respect of a speculation business carried on by the assessee shall not be set off except against profits and gains if any of another speculation business 2 Where for any assessment year any loss computed in respect of a speculation business has not been wholly set off under sub section 1 so much of the loss as is not so set off or the whole loss where the assessee had no income from any other speculation business shall subject to the other provisions of this Chapter be carried forward to the following assessment year and i it shall be set off against the profits and gains if any of any speculation business carried on by him assess able for that assessment year and ii if the loss cannot be wholly so set off the amount of loss not so set off shall be carried forward to the following assessment year and so on 75
Losses of registered firms 1 Where the assessee is a registered firm any loss which cannot be set off against 1275 any other income of the firm shall be apportioned between the partners of the firm and they alone shall be entitled to have the amount of the loss set off and carried forward for set off under sections 70 71 72 73 and 74
2 Nothing contained in sub section 1 of section 72 sub section 2 of section 73 or sub section 1 of section 74 shall entitle any assessee being a registered firm to have its loss carried forward and set off under the provisions of the aforesaid sections
 On reading the above provisions of section 73 it is manifest that the assessee s loss in speculation business cannot be set off except against profits and gains if any of another speculation business
For the purpose of set off it is permissible to carry forward the losses to the following assessment year or years subject to the limit of 8 years as provided in sub section 4 of section 73
But it is to be noticed that the provision contained in sub section 2 is subject to the other provision of this Chapter which includes section 75
In the latter section it is clearly provided that where the assessee is a registered firm for the purpose of set off and carry forward of the loss apportionment between the partners of the firm has got to be made and they alone are entitled to have the amount of the loss set off and carried forward for set off under section 73
The matter is put beyond any pale of doubt and challenge in sub section 2 of section 75 when it says that nothing contained in sub section 2 of section 73 shall entitle a assessee being a registered firm to have its loss carried forward and set off under the provisions of section 732
The Tribunal and the High Court therefore were right in holding that the ratio of the decision of this Court in Kantilal Nathunchand s case supra cannot be applied in respect of the assessment made under the Act
Identical views have been expressed by the High Court of Gujarat in Commissioner of Income Tax Gujarat III vs Dhanji Shamji1 and the High Court of Punjab and Haryana in Choudhary Cotton Ginning and Pressing Factory vs Commissioner of Income Tax Punjab
 2 For the reasons stated above we dismiss all the appeals with costs
Hearing fee one set only
VDK Appeals dismissed


Summary:
The assessee appellant is a registered firm carrying on business at several places in the State of Kerala
Apart from its regular trade in various commondities the assessee was also carrying on a business in speculation
In respect of the losses during the assessment years 1964 65 1965 66 and the profit during the assessment year 1966 67 the Income Tax Officer apportioned the aforesaid losses and profits amongst the partners and rejected the assessee s contention that the losses in speculation business should be carried forward and set off against the profit in the said business made in the assessment year 1966 67
But the Appellate Assistant Commissioner following the decision of this Court in CIT Gujarat vs Kantilal Nathuchand Sami accepted the assessee s stand
The Tribunal on second appeal answered in favour of the Revenue and the High Court also answered the reference against the assessee
Dismissing the appeals by special leave the Court  HELD 1
The case of Kantilal Nathu Chand was decided on a true interpretation of Section 241 of the Income Tax Act 1922 and the two provisions appended thereto
But the provisions of law contained in Chapter VI of the 1961 Act have made a considerable departure from the corresponding provisions of the 1922 Act
1274A B D It is clear from the provisions of Section 73 of the 1961 Act that the assessee s loss in speculation business cannot be set off except against profits and gains if any of another speculation business
1275B 2
For the purpose of set off it is permissible to carry forward the losses to the following assessment year or years subject to the limit of eight years as provided in Section 73 of the 1961 Act
1275C 3
The provision contained in Sub section 2 of Section 73 of the 1961 Act is subject to the other provisions of this Chapter which includes section 75
Under section 75 where the assesee is a registered firm for the purpose of set off and carry forward of the loss apportionment between the partners of the firm has got to be made and they alone are entitled to have the amount of the loss set off and carried forward for set off
The matter is put beyond any 1272 pale of doubt and challenge in sub section 2 of section 75 when it says that nothing contained in sub section 2 of section 73 shall entitle any assessee being a registered firm to have its loss carried forward and set off under the provisions of Section 732
1275D E CIT Gujarat vs Kantilal Nathu Chand 1 SCR 813 distinguished
CIT Gujarat III vs Dhanji Shamji Chowdary Cotton Ginning and Processing Factory vs CIT Punjab 109 ITR p 6 approved
M G Devasia  Co vs CIT Kerala  affirmed