Case: Commissioner of Income-tax Kerala Vs. Helen Rubber Industries Limited

that part of the section does not apply to the assessee Companys case. What was thus claimed was the benefit of the earlier part, where the loss was allowed to be carried forward for six years.6. This position taken by the assessee Company can hardly be considered in view of the provisions of S. 32 of the Travancore Act, read with the Removal of Difficulties Order passed in 1950. Section 32 of the Travancore Act was a reproduction of the Indian S. 24(2) except for a change of the dates mentioned therein, due obviously to the fact that the Travancore Act came into force on the first day of Chingom, l122 M.E. (August 17, 1946). It is enough to point out that instead of "31st March" wherever they occurred, the words "the last day of Karkadakom" (August, 16) were substituted, and instead of the years, 1940, 1941, 1942, 1943 and 1944, were substituted the Malayalam years, l122 (17-8-1946 to 16-8l947), l123 (17-8-1947 to 16-8-1948), l124 (17-8-1948 to 16-8-1949), l125 (17-8-1949 to 16-8-1950), and l126 (17-8-1950 to 16-8-1951). These were the only differences between the two sections, and S. 24(2) of the Indian Income-tax Act, so modified, can be read as S. 32 of the Travancore Act.7. The existence of these two sections in the two Acts was likely to lead to some difficulty, and a question was likely to arise which law was to prevail. Section 12 of the Indian Finance Act, 1950, therefore, enabled the Central Government to pass an Order removing any such difficulty. The Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950 was thus passed. Paragraph 3 of that order provided :"3. Carry forward and set off of previous losses.-Where in any previous year prior to the previous year for the assessment for the year ending on the 31st day of March 1950, an assessee has sustained a loss of profits or gains in any business, profession or vocation carried on by him, and such loss would, had the State law continued to be in force, have been set off against the profits and gains, if, any, from the same business chargeable to tax in the said year of assessment or in any year subsequent thereto, such loss would be so set off in the same manner, to the same extent, and up to the same year of assessment, as it would have been set off had the State law continued to be it force."8. The critical words are those contained in the latter part, namely, "in the same manner, to the same extent, and up to the same year of assessment, as it would have been set off had the State law continued to be in force." They show that the law to apply to the loss of "any previous year prior to the previous year for the assessment for the year ending on the 31st day of March, 1950," was the law, in force in a Part B State-here, the Travancore Act. Now, taking the case of the assessee Company ,we shall indicate which previous year or years would be governed by the Travancore Act. The previous year of the assessee Company for the assessment year ending 31st day of March, 1950 would be the Calendar year, 1-1-1949 to 31-12-1949. To that, the Indian Income-tax Act would apply. The application of the Travancore Act by Para. 3 of the Order was limited to the previous year before 1-1-1949 and other earlier previous years. The previous year, with which we are concerned, 1-1-1946 to 31-12-1946, is so clearly a previous year, to which the Travancore Act applies, that it does not admit of any doubt or difference. The matter is thus governed by the Travancore Act.9. The Travancore Act laid down, inter alia, that a loss arising in the previous year for the assessment for the year ending on the last day of Karkadakom, l123, could be carried forward for two years. The assessment year for l123 M. E. covered the period, 17-8-1947 to 16-8-1948, and the previous year of the assessee Company relative to that assessment year was 1-1-1946 to 31-12-1946. The loss of the Calendar year, 1946 could be carried forward to the Calendar years, 1947 and 1948 given effect to till the assessment year, 1125 (17-8-1949 to 16-8-1950). The assessment year, 1-4-1951 to 31-2-1952, corresponded to the account year of the assessee Company 1-1-1950 to 31-12-1950, and that is beyond two years, whether one takes the account year or the assessment year as the basis of the calculation of two years.10. The High Court with all due respect, was not right in thinking that the Removal of Difficulties Order 1950 was meant to enlarge the rights of the new assessees brought within the reach of the Indian Income-tax law. The intention of the law was to make a dividing line between those previous years to which the provisions of the earlier law would apply, and those previous years to which the provisions of the Indian Income-tax Act would apply. The rights were neither enlarged nor curtailed. As pointed out by Chagle, C.J., in the Indore Malwa United Mills, Ltd. v. Commissioner of Income-tax, Bombay, 1959-35 ITR 271 (Bom):"the only right integration has given to an assessee is the right contained in clauses (sic) 3 of the Removal of Difficulties Order, 1950, and that right is that if the law of his own State permitted him to carry forward the losses, then that right is preserved under the Indian Income-tax Act."Paragraph 3 of the Order clearly said that the right was available in the same manner, to the same extent and up to the same year of assessment, as laid down in the State law (here, the Travancore Act). Since, in this case, the carry-forward of the loss was for only two years, and those years were before the previous year from which the Indian Income-tax Act began to apply, there is no question of the application of the Indian Income-tax Act.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]8. The critical words are those contained in the latter part, namely, "in the same manner, to the same extent, and up to the same year of assessment, as it would have been set off had the State law continued to be in force." They show that the law to apply to the loss of "any previous year prior to the previous year for the assessment for the year ending on the 31st day of March, 1950," was the law, in force in a Part B State-here, the Travancore Act. Now, taking the case of the assessee Company ,we shall indicate which previous year or years would be governed by the Travancore Act. The previous year of the assessee Company for the assessment year ending 31st day of March, 1950 would be the Calendar year, 1-1-1949 to 31-12-1949. To that, the Indian Income-tax Act would apply. The application of the Travancore Act by Para. 3 of the Order was limited to the previous year before 1-1-1949 and other earlier previous years. The previous year, with which we are concerned, 1-1-1946 to 31-12-1946, is so clearly a previous year, to which the Travancore Act applies, that it does not admit of any doubt or difference. The matter is thus governed by the Travancore Act.9. The Travancore Act laid down, inter alia, that a loss arising in the previous year for the assessment for the year ending on the last day of Karkadakom, l123, could be carried forward for two years. The assessment year for l123 M. E. covered the period, 17-8-1947 to 16-8-1948, and the previous year of the assessee Company relative to that assessment year was 1-1-1946 to 31-12-1946. The loss of the Calendar year, 1946 could be carried forward to the Calendar years, 1947 and 1948  given effect to till the assessment year, 1125 (17-8-1949 to 16-8-1950). The assessment year, 1-4-1951 to 31-2-1952, corresponded to the account year of the assessee Company 1-1-1950 to 31-12-1950, and that is beyond two years, whether one takes the account year or the assessment year as the basis of the calculation of two years.10. The High Court with all due respect, was not right in thinking that the Removal of Difficulties Order 1950 was meant to enlarge the rights of the new assessees brought within the reach of the Indian Income-tax law.