ivil Appeal No 1375 of 1974 605 From the Judgment and Order dated 212
1971 of the Allahabad High Court in Excise Profit Tax Reference No 55 of 1968
Dr V Gauri Shankar and Miss A Subhashini for the Appellant
ST Desai Harish Salve Mrs AK Verma and DN Mishra for the Respondent
The Judgment of the Court was delivered by SABYASACHI MUKHARJI J
This appeal is directed against the judgment and order of the High Court of Allahabad dated 21st February 1971
It relates to the assessment under the Excess Profits Tax Act 1940 hereinafter called the Act 
The assessee was an unregistered firm carrying on business of manufacture and sale of katechu
The chargeable account ing period was 1 4 1943 to 313
There were two partners of the assessee firm namely L Phoolchand and Ms Biharilal Balkishan each having profits in proportion of 11 annas and 5 annas respectively
The work in connection with the extraction of Katechu was carried on in Nepal by 1
Phoolchand and the sale of Katechu were effected by Ms Biharilal Balkishan at their shops in Kanpur
The assessee firm did not maintain any books of account and the entire record of the business transaction was maintained in the books of Ms Biharilal Balkishan in the account styled Kalyanmal Phoolchand
The assessee firm had taken a jungle on lease for this purpose and had extracted Katechu from October 1940 to September 1941
The sales of katechu extracted were effect ed from 30th May 1941 to 29th September 1941
Thereafter another jungle was taken on lease in November 1942 and Katechu were extracted from 23rd November 1942 to 6th November 1944
The sales in this case were effected between 26th July 1943 to 4th April 1944
The High Court divided the entire period of manufacture and sale as follows 1 October 28 1940 to March 31 1941 failing in the financial year ending March 311941
Katechu was manufac tured but there was no sale
April 1 1941 to September 29 1941 failing in the financial year ending March 31 1942
Sales took place from May 30 1941 to September 29 1941
606 3
November 23 1942 to March 31 1943 falling in the financial year ending March 31 1943
Katechu was manufac tured but there was no sale
April 1 1943 to March 31 1944 falling in the finan cial year ending March 31 1944 sales took place from July 26 1943 to March 31 1944
April 1 1944 to April 4 1944 falling in the finan cial year ending March 31
1945 sales were effected from April 1 1944 to April 4 1944 when the business was dis continued
Therefore while there was manufacturing activity there was no sale during the financial years ending 31st March 1941 and 31st March 1943
The dispute in this case is with regard to the set off of deficiency of profit relating to the periods 20th October 1940 to 17th October 1941 and 23rd November 1942 to 31st March 1943
The Excess Profit Tax Officer did not set off the said deficiency of profits that accrued in respect of the period 1940 41 out of the profits for the chargeable accounting period from 141943 to 313
The submission of the assessee was that the business carried on during the charge able accounting period under consideration was not separate to and distinct from the business carried on in 1940 41
The Excess Profit Tax Officer held that business carried on during October 1940 to October 2941 was completely differ ent from the business carried on during the chargeable accounting period under consideration
The Appellate Assistant Commissioner on appeal found that the constitution of the firm during the chargeable accounting period was the same as in 1940 41 and the ac counts were maintained in the same fashion and that the same business of manufacturing Katechu in Nepal and selling the finished products at kanpur was carried on
The Appel late Assistant Commissioner therefore held that the asses see was entitled to set off in respect of the deficiency of profits accruing in the year 1940 41
The Appellate Assist ant Commissioner further found that the assessee had effect ed sales only during 30th May 1941 to 29th September 1941
As such there were no sales either during or until 30th May 1941 land subsequent to 29th September 1941
As such he held that there was no profit arising during the accounting period ending on 31st March 1941
He therefore confirmed that there were no profits and losses during the chargeable accounting 607 period ending on 31st March 1941 and as such there could be no deficiency of profits
In the premises according to the Appellate Assistant Commissioner the assessee was entitled to a set off of the deficiency only for the chargeable accounting period ending on 31st March 1942 which consisted of the period 1st April 1941 to 29th September
He allowed such deficiency of Rs5600 only
So far as the deficiency pertaining to the period November 1942 to 3 Ist March 1943 was concerned the facts were that the manufac turing operations started in Nepal on or about 23rd Novem ber 1942 and the sales of Katechu started at Kanpur on 26th July 1943 Katechu produced in Nepal from 23rd November 1942 to 31st March 1943 remained in stock till the last date of the chargeable accounting period namely 31st March 1943 and no part of it was sold
As the assessee did not maintain any books of account the provisions of section 13 of the Income Tax Act 1922 as applied to the Act vide section 21 of the Act were applicable
The revenue there fore valued the stock in trade at cost and held that there could be no profit or loss during the chargeable accounting period
In appeal the assessee had urged that deficiency in profits pertaining to the chargeable accounting periods from October 1940 to 31st March 1941 and 23rd November 1942 to 31st March 1943 should be allowed a set off in computing the excess profits for the year under consideration
It was submitted that there was no profits pertaining to the said chargeable accounting period and therefore the standard profits as provided in the Act became the deficiency of the said two chargeable accounting periods which should have been allowed set off
It was further urged on behalf of the assessee that the manufacturing operations were carried on during the said periods and as such it could not be said that the assessee did not carry on any business
The Tribunal however held that no profits accrued unless sale was effected and therefore there was no merit in the submission made on behalf of the assessee that during the said two chargeable accounting periods although there were no sales effected yet profits accrued to the assessee
It was urged on behalf of the revenue that as provided in the Act the provisions of the Act would apply to every business of which any part of profits was made during the chargeable accounting period is chargeable to income tax
It was further urged that no part of profits if any which accrued during the said two chargeable accounting periods could be charged and were in fact not so charged to income tax as no sales were effected and therefore the Act itself did not apply to the said two chargeable account ing periods
The Tribunal accepted this contention on behalf of the revenue and as 608 such confirmed the order of the Appellate Assistant Commis sioner
On the said facts the following question of law was referred to the High Court at the instance of the assessee Whether on the facts and in the circum stances of the case the assessee was entitled to a set off of deficiency of profits relating to the period 28101940 to 3131941 and 2311
1942 to 3131943 from the profits of the chargeable accounting period 141943 to 3131944 in accordance with the provisions of the EPT Act 1940 The High Court held that it was not disputed before them that the assessee was carrying on the same business from 28th October 1940 to 4th April 1944 for the purpose of the Act
The only question was whether the assessee could be said to have suffered any deficiency of profits during the period 28th October 1940 to 31st March 1941 and 23rd November 1942 to 31st March 1943 and was whether entitled to be given the benefit of such deficiency
of profit
The High Court referred to certain definitions and recognised and in our opinion rightly that there were sever al stages in business activities before profits could be realised
The High Court observed that profits realised were not of the sale alone
The profits were attributable to the manufacturing operations as well
The High Court referred to certain decisions to which our attention was also drawn where under the Act as to the place where the profits arose the courts had enquired into the place where the manufactur ing took place and where the sales took place
This conten tion is no longer relevant for the controversy before us
It was accepted before us that a manufacturing process may begin in one year and result in sale in another year and also that manufacturing process may take at one place and sale at another place
For the purpose of computing the profit of certain operation it is true as the High Court noted that manufacture and sale might take place in two different years
The High Court held that though chargeable levy was an annual charge and generally for the purpose of the levy of the annual charge the profits of the year preceding the year of charge are taken into consideration if the manufacturing activity leading to the production of finished article which was subsequently sold contributed to the profits realised according to the High Court it mattered little whether or not the manufacturing activity of the sale related to the same period of 609 twelve months
Some part of the profits realised would be attributable to the manufacturing activities and therefore could be said to arise during the period when manufacturing was carried on even though sales were effected in the next year
The High Court therefore was of the view that it was necessary to determine what part of the profits realised upon the sales from 30th May 1941 to 29th September 1941 could be attributed to the manufacturing activity between 28th OCtober 1940 to March 1941 and then to compute the deficiency of profits for the chargeable accounting period ending 31st March 1941
That might require according to the High Court a fresh determination of the profits earned during the period 1st April 1941 to 29th September 1941 and consequently of the deficiency of profits during the chargeable accounting period ending 31st March 1942
The High Court was of the view that the deficiency of profits for the chargeable accounting periods ending 31st March 1941 and 31st March 1942 would have to be set off when computing the excess profits for the relevant chargeable accounting period ending 31st March 1944
The High Court expressed the view that under section 25 of the Act the job of the assessee in the extraction and sale of Katechu under the two jungle leases must be considered as a single business for the purpose of the Act
The High Court there fore came to the conclusion that upon the principle of apportionment of profits to which it had adverted to the profits earned upon sales effected during the chargeable accounting period ending 31st March 1944 must similarly be apportioned between the manufacturing activity during the chargeable accounting period ending 31st March 1943 and the sales during the chargeable accounting period ending 31st March 1944 and the deficiency of profits worked out on that basis in respect of the chargeable accounting period ending 3 Ist March 1943 must be set off in computing the excess profits for the chargeable accounting period ending 31st March 1944
The High Court therefore did not accept the opinion of the Tribunal that because the chargeable account ing periods ending 31st March 1941 and 31st March 1943 were occupied with manufacturing activity alone and there were no sales therefore no part of the profits realised upon the sales could be apportioned to those chargeable accounting periods and consequently that it could not be said that there was any deficiency of profits during those periods
The question referred to the High Court was an swered in affirmative
In order to appreciate the real controversy in this matter it is appropriate to refer to the observations of Kania J as the Chief Justice then was in the decision in the case of Commissioner of Income 610 Tax Bombay vs Raipur Manufacturing Co Ltd at 733
It was observed as follows The Excess Profits Tax Act as shown by the preamble itself is a legislation to impose tax on excess profits arising out of certain business
The Income tax Act is the principal legislation which imposes a tax on the income of a person
Section 6 divides the income under five heads which are chargeable to tax
The fourth head is profits and gains of busi ness profession or vocation
Out of that a certain portion is carved out by the Legisla ture for the purpose of imposing the excess profits tax
I am unable to accept the conten tion of the Commissioner that the Excess Profits Tax Act is an entirety independent legislation which is connected with the Income tax
Act only to the extent it is expressly so stated in the Excess Profits Tax  Act
The scheme that the Excess Profits Tax Act is a legislation intended to tax the profits of certain business in excess of a certain limit as provided in that Act
It is therefore complementary to the Income tax Act by its very nature As the Statement of Objects of the Act stated that the outbreak of war while it has necessitated greatly increased expenditure by the Government on defence and other services has simultaneously created opportunities for the earning by companies and persons engaged in business of abnormally large profits
The object of the Bill which later became the Act was to secure for the Government a considerable portion of the additional business profits which accrued as a result of the conditions prevailing during the war
To begin with the right to impose a tax of 50 of the excess of the profit made in any accounting period after the 1st day of April 1939 was given
It had subsequently been increased to 66 23 
Section 21 of the Act defines the accounting period 
Section 26 defines chargeable accounting period as a any accounting period falling wholly within the term begin ning on the 1st day of September 1939 and ending on the 31st day of March 1946 and b where any accounting period falls partly within and partly without the said term such part of that accounting period as fails within the said term
The standard profits  is defined under section 22 which was required to be computed in accordance with the provisions of section 6 of the Act
It is not necessary in view of the controversy before us to refer to other defini tions except that section 23 deals with average 611 amount of capital  which is relevant for computation of the excess profits
Section 6 defines the standard profits  and how it is to be computed
As there was no controversy on this aspect before us it is not necessary to deal with it
Section 29 defines deficiency of profits  as follows 9 deficiency of profits means i where profits have been made in any chargeable accounting period the amount by which such profits fall short of the stand ard profits ii where a loss has been made in any charge able accounting period the amount of the loss added to the amount of the standard profits Section 4 defines charge of tax  as follows Charge of tax  1  Subject to the provi sions of this Act there shall in respect of any business to which this Act applies be charged levied and paid on the amount by which the profits during any chargeable ac counting period exceed the standard profits a tax in this Act referred to as excess prof its tax which shall in respect of any chargeable accounting period ending on or before the 31st day of March 1941 be equal to fifty per cent of that excess and shall in respect of any chargeable accounting period beginning after that date be equal to such percentage of that excess as may be fixed by the annual Finance Act Provided that any profits which are under the provisions of sub section 3 of section 4 of the Indian Incometax Act 1922 exempt from income tax and all profits from any business of life insurance shall be total ly exempt from excess profits tax under this Act
Provided further that in the case of any business which includes the mining of any mineral any bonus paid by or through the Central Government in
respect of increased out put of the mineral shall be totally exempt from excess profits tax under this Act
2Where a chargeable accounting period falls partly 612 before and partly after the end of March 1941 the foregoing provisions of this section shall apply as if so much of that chargeable accounting period as falls before and so much of that chargeable accounting period as falls after the said end of March were each a separate chargeable accounting period and as if the excess of profits of that separate chargeable accounting period were an appor tioned part of the excess of profits arising in the whole period determined in accordance with the provisions of section 7A Section 7 deals with the relief on occurrence of defi ciency of profits and provides in substance that where a deficiency of profits occurs in any chargeable accounting period in any business the profits of the business charge able with excess profits tax shall be deemed to be reduced and relief shall be granted according to the provisions laid down therein
The main question in this case is to keep the distinc tion between accounting period  and chargeable accounting period 
The accounting period it has to be borne in mind is the twelve months  proceeding just on the basis of the income tax year and the assessment must be made on the same basis
The chargeable accounting period  is the period beginning from 1st September 1939 ending after amendment on 31st March 1946
So if there is any deficiency of profits in any of the accounting period which has not been absolved in the assessment for that year may be carried forward but the assessment must be made on the basis of the accounting period
This has to be emphasised and it must be borne in mind that though it is wholly immaterial whether the manu facture and sale took place in the same year or in two different years the division of time into periods for its assessment must be made in a real sense as in the income tax one and then make appropriate adjustments
Therefore the profits and losses of each year must be computed on yearly basis in terms of the definition of accounting period  under section 21 of the Act
But if any deficiency of profits remains unabsolved it may be carried forward against any excess profits made and set off during the next accounting period
The chargeable accounting period is the period from 1st September 1939 to 31st March 1946
But each year s excess profit  loss must be computed in the manner contemplated in section 21 of the Act
So if there was any deficiency of profits in any particular period it must be determined on that basis
In order to work out the scheme of the Act there must be proper devetailing of the concept of accounting period 613 chargeable accounting period and basic scheme of the Income Tax Act bearing in mind that excess profits are excess of profits which were intended to be mopped up during the war period intended to be taxed separately and differ ently
This view finds support in the decision of the Alla habad High Court
In the case of Haji Rahmat Ullah and Co vs Commissioner of Income tax UP the High Court of Allahabad held that a payment received in any year subsequently to a chargeable accounting period is not liable to be treated as the profits of that period merely because the work which occasioned that payment was done during that period
The profits during the chargeable accounting peri od are those profits respecting which a right to receive had accrued or arisen during that period
If the right to receive those profits had accrued or arisen subsequently then even though they had accrued or arisen by reason of work done during the chargeable accounting period these were not liable to be treated as the profits of that charge able accounting period
The High Court observed that it would seem ex facie that if the profits earned during a certain period are taxable under the Income tax Act it is a part of those very profits which is liable to excess profits tax
Whether the profits in the one case could be identified with the profits in the other would be determined by refer ence to the period in which those accrued or arose
It was emphasised that the profits during the chargeable accounting period must be computed under the Excess Profits Tax on the same basis as are profits for an income tax assessment
It is clear that excess profits tax is attracted in respect of a business to which the Act applied when the profits during the chargeable accounting period exceed the standard profit
It has to be clearly borne in mind that the Act is not an entirely different Act in the sense that it proceeds upon the concept completely different from the notions of Income tax and has its source in an entirely different tax concept
More profits which were likely to have been earned during those years these were made subject to excess profits
It appears to us that the period of assessment in the Act is an accounting period in the same way as the previ ous year  is the period of assessment for the purpose of Income Tax
Though profit in a composite transaction could be apportioned as between manufacture and sale in the same accounting year such an apportionment is not permissible when one part of the transaction ie manufacture fails in one chargeable accounting period and falls in another part of the accounting period ie the trading operations ie falls in another accounting period then set off of defi ciency in profits under section 7 of the Act is permitted but a necessary precondition was that profit 614 must be made in the accounting period to which the deficien cy relates
The profits attributed on apportionment was outside the scope of section 7 of the Act
It must be remem bered that the excess profit  under the Act is profit determined under the Income Tax Act subject to prescribed adjustments
If the income tax assessment discloses nil profits no separate profit can be determined independently under the Act
The position of the Excess Profits Tax Act was explained by Lord President Clyde in Edward Collins  Sons
Ltd vs The Commissioner of Inland Revenue at 780 where the Lord President emphasised that subject to certain modi fication those profits had to be determined in the same way and on the same principle as a trader s profits and gains have to be computed for the purposes of the Incometax Act
It is a general principle in the computation of the annual profits of a trade or business under the Income Tax Acts that those elements of profit or gain and those only enter into the computation which are earned or ascertained in the year to which the enquiry refers and in like manner only those elements of loss or expense enter into the computation which are suffered or incurred during that year
The same principle in our opinion would be applicable to the facts of this case
The decision of this Court in Commissioner of Income tax Bombay vs Ahmedbhai Umarbhai  Co Bombay 18 ITR 472 related entirely to a different context where certain part of the activities occurred at Raichur and the sales took place in Bombay the question was whether the activity which the assessee carried on at Raichur was part of their business within the meaning of the third proviso to section 5 of the Act that the profits of a part of the business the manufacturing of oil in their mills at Raichur accused or arose at Raichur and that such profits were not assessa ble to excess profits tax under the third proviso to Section 5 of the Act
That is not the controversy herecontroversy is not so much where the profits arose nor is the controver sy whether the profits arose during the chargeable account ing period but where the profits arose during the account ing period  and as such whether the deficiency of the prof its not arising during counting period  but during the chargeable accounting period  could be set off without computation
The method of computation under section 7 of the Act must be on the basis of accounting period  and after that the deficiency in profits for that period should be computed on that basis and after set off carried forward to be set off during the chargeable accounting period
It is thus an harmonious construction of 615 the different provisions of the Act is possible and the true excess profits if any as contemplated by the Act be deter mined
The concept of accounting period  in the background of the chargeable accounting period  can thus be harmo nised
The accounting period was 1st April 1943 to 31st March 1944
In the facts of the case we are of the opinion that the question must be answered in the negative and in favour of the revenue
The appeal is allowed and the judg ment and order of the High Court are set aside
In the facts and circumstances of the case parties will pay and bear their own costs
APJ Appeal allowed


Summary:
The assessee was an unregistered firm carrying on busi ness of manufacture and sale of Katechu
The firm carried on the work of extraction of Katechu in Nepal and sales were affected in Kanpur
It had first taken a jungle on lease and Katechu were extracted from October 1940 to September 1941
Sales were effected from 30th May 1941 to 29th September 1941
Thereafter another jungle was taken on lease and Katechu were extracted from 23rd November 1942 to 6th November 1944
The sales were effected between 26th July 1943 to 4th April 1944
The assessee claimed set off of deficiency of profit for the periods 20th October 1940 to 17th October 1941 and 23rd November 1942 to 31st March 1943 on the ground that the business carried on during the chargeable accounting period 1 4 1943 to 31 3 1944 was not separate to and dis tinct from the business carried on in 1940 41
The Excess Profit Tax Officer did not set off the defi ciency of profits that accrued in respect of the period 1940 41 out of the profits for the chargeable accounting period from 1 4 1943 to 31 3 1944 and held that the busi ness carried on during October 1940 to October 1941 was completely different from the business carried on during the aforesaid chargeable accounting period
So far as the deficiency pertaining to the period Novem ber 1942 to 31st March 1943 was concerned the manufactur ing operations started on or about 23rd November 1942 and the sales started on 26th July 1943
Katechu produced from 23rd November 1942 to 31st March 1943 remained in stock till the last date of the chargeable accounting period
namely 31st March 1943
As the assessee did not maintain any books of account the provisions of section 13 of the Income Tax were applicable
The Revenue therefore valued the stock intrade at cost and held that there could be no profit or loss during the chargeable accounting period
In appeal the assessee urge that deficiency in profits pertaining to the chargeable accounting periods from Octo ber 1940 to 31st March 1941 and 23rd November 1942 to 31st March 1943 should be allowed a set off in computing the excess profits and as there were no profits during the said chargeable accounting period the standard profits became the deficiency of the said two years which should have been allowed set off and that as manufacturing opera tions were carried on during the said periods it could not be said that the assessee did not carry on any business
The Appellate Assistant Commissioner found that the constitution of the firm during the chargeable accounting period was the same as in 1940 41 that the accounts were maintained in the same fashion and the same business was carried on that the assessee had effected sales only during 30th May 1941 to 29th September 1941 and held that the assessee was entitled to set off in respect of the deficien cy of profits
He therefore confirmed that there were no profits and losses during the chargeable accounting period ending on 31st March 1941 and as such there could be no deficiency of profits
The assessee was therefore held to be entitled to a set off of the deficiency only for the chargeable accounting period ending on 31st March 1942 which consisted of the period 1st April
1941 to 29th Sep tember
The Tribunal however held that no profits accrued unless sale was effected and accepting the contention of the Revenue that no part of profits which accrued during the said two chargeable accounting periods could be charged and were in fact not so charged to income tax as no sales were effected the Act itself did not apply and confirmed the order of the Appellate Assistant Commissioner
The High Court divided the entire period of manufacture and sales to determine the question whether there was manu facturing activity and sale 1 October 28 1940 to March 31 1941 failing in the financial year ending March 31 1941 Katechu was manufactured but there was no sale 2 April 1 1941 to September 29 1941 failing in the finan cial year ending March 31 1942 sales took place from May 30 1941 to September 29 1941 3 November 23 1942 to March 31 1943 failing in the financial year ending March 31 1943 Katechu was manufactured but there was no sale 4 April 1 1943 to March 31 603 1944 failing in the financial year ending March 31
1944 sale took place from July 26 1943 to March 31 1944 5 April 1 1944 to April 4 1944 failing in the financial year ending March 31 1945 sales were effected from April 1 1944 to April 4 1944 when the business was discontinued
It held that while there was manufacturing activity there was no sale during the financial years ending March 31 1941 to March 31 1943 that the profits earned upon sales ef fected during the chargeable accounting period ending 31st March 1944 must be apportioned between the manufacturing activity during the chargeable accounting period ending 31st March 1943 and the sales during the chargeable accounting period ending 31st March 1944 and that the deficiency of profits must be set off in computing the excess profits for the chargeable accounting period ending 31st March 1944
The High Court therefore did not accept the opinion of the Tribunal and held that the assessee was entitled to a set off of deficiency of profits relating to the periods 28 10 1940 to 31 3 1941 and 23 11 1942 to 31 3 1943 from the profits of the chargeable accounting period 1 4 1943 to 31 3 1944
Allowing the Appeal HELD 1
The scheme contained in the Excess Profits Tax Act is a legislation intended to tax the profits of certain business in excess of a certain limit as provided in that Act
It is therefore complementary to the Income Tax Act by its very nature
610D Commissioner of Income Tax Bombay vs Raipur Manufactur ing Co Ltd at 733 followed
In order to work out the scheme of the Act there must be proper dovetailing of the concept of accounting period  chargeable accounting period  and basic scheme of the Income Tax Act bearing in mind that excess profits are excess of profits which were intended to be mopped up during the war period to be taxed separately and differently
612H 613A B 3
If the right to receive those profits had accrued or arisen subsequently then even though they had accrued or arisen by reason of work done during the chargeable account ing period these were not liable to be treated as the profits of that chargeable accounting period
613C 4Whether the profits in the one case could be identi fied with the profits in the other would be determined by reference to the period in which those accrued or arose
The profits during the chargeable 604 accounting period must be computed under the Excess Profits Tax on the same basis as are profits for an income tax assessment
613D E Haji Rahmat Ullah and Co vs Commissioner of Income tax UP  relied upon
It has to be clearly borne in mind that the Act is not an entirely different Act in the sense that it proceeds upon the concept completely different from the notions of Income Tax and has its source in an entirely different tax concept
More profits which were likely to have been earned due to profits these were made subject to excess profits
613E F 6
Though profit in a composite transaction could be apportioned as between manufacture and sale in the same accounting year such an apportionment is not permissible when one part of the transaction ie manufacture falls in one chargeable accounting period and falls in another part of the accounting period ie the trading operations ie falls in another accounting period then set off deficiency in profits under section 7 of the Act is permitted but a necessary precondition was that profit must be made in the accounting period to which the deficiency relates
613G H 614A 7
The excess profit under the Act is profit determined under the Income Tax Act subject to prescribed adjustments
If the income tax assessment discloses nil profits no separate profit can be determined independently under the Act
614A B 8
It is a general principle in the computation of the manual profits of a trade or business under the Income Tax Acts that those elements of profits or gain and those only enter into the computation which are earned or ascer tained in the year to which the enquiry refers and in like manner only those elements of loss or expense enter into the computation which are suffered or incurred during that year
614C D Edward Collins  Sons Ltd vs The Commissioners of Inland Revenue at 780 followed and Commission er of Incometax Bombay vs Ahmedbhai Umarbhai  Co Bombay 18 ITR 472 distinguished