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

2. Messrs. Helen Rubber industries; Ltd. is a Company, which was incorporated in the former State of Travancore with its registered office at Kottayam. In the year 1941, the assessee Company granted a lease of the factory to certain persons for a period of 15 years. From that year, the rent and royalty received from the lessees were the only source of income. Disputes having arisen, the lessees suspended payment from June 1946. Litigation followed; but the dispute was settled by the assessed Company receiving Rs. 23,000/- odd in full satisfaction. With the details of these disputes and their settlement, we are not concerned. The year of account of the assessee Company is the Calendar year. Before the extension of the Indian Income-tax Act, there was in force in Travancore State, the Travancore Income-tax Act, 1121 M. E. (Act XXIII of 1121 M. E.) which came into force on the first day of Chingom 1122 M. E. (August 17, 1946). The assessment year under the Travancore Act ended on the last day of Karkadakom, which corresponds to August 16, 1947 Thus, for the account year, 1-1- 1946 to 31-12-1946 of the firm, the assessment year was 1123 M. E. (17-8-1947 to 16-8-1948).3. The assessee Company declared losses in the account years, 1946, 1947 and 1948. These losses, together with the dates of the account years and the assessment years are tabulated below :Year of account Year of assessment Loss1946 (1-1-1946) to 31-12-1946) 1123 M. E. (17-8-1947 to 16-8-1948) Rs. 4031-10-01947 (1-1-1947 to 31-12-1947) 1124 M. E. (17-8-1948 to 16-8-1949) Rs. 6605- 1-61948 (1-1-1948 to 31-12-1948) 1125 M. E. (17-8-1949 to 16-8-1950) Rs. 2604-18-9Total Rs.13,241- 9-34. The dispute in this case is about the right of the assessee Company to carry forward the loss of the year 1946 under the provisions of the Travancore Act read with S. 24 (2) of the Indian Income-tax Act and the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, to the assessment year, 1951-52, in the assessment of the Company for its year of account, the Calendar Year, 1950. The Income-tax Officer held that the loss of the year 1946 could not be carried forward to that year, since it had lapsed after two years under S. 32 of the Travancore Act, and S. 24(2) was not applicable, in view of paragraph 3 of the Order mentioned above. The order of the Income-tax Officer was confirmed in appeal by the Appellant Assistant Commissioner and the Appellate Tribunal. The Tribunal was moved for a case, but declined to state one ; but the High Court called for statement of the case under S. 66(2) and the abovementioned question was decided in favour of the assessee Company. The only question argued in this appeal is whether the High Court was right in the answer it gave. The assessee Company was not represented at the hearing before this Court.

Reasoning: 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.