COMMISSIONER OF INCOME-TAX Vs. CHUNI LAL MONGA RAM
HIGH COURT OF PUNJAB AND HARYANA
COMMISSIONER OF INCOME-TAX
CHUNI LAL MONGA RAM
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(1.) ON an application under Section 66 (2) of the Income Tax Act by the Commissioner of income-Tax my Lord the Chief Justice and I required the Income Tax Appellate Tribunal to state the case and refer the following two questions to this Court:--" (1) Whether the claim of loss in this case is governed by the provisions of Section 10 (1) or 24 (1) proviso read with Section 14 (2) (c) or by the provisions of Section 42? (2) Whether on the facts of the case a loss of Rs. 22, 981/- is allowable in computing the income of the assessep chargeable to the excess profits tax?
(2.) THE case arises out of the assessment of the respondent firm Messrs. Chum" Lal Hansa Ram for the year 1946-47 to income-tax, and to excess profits tax for the period ending 6-2-1946. The assessee firm carries on a speculation business at Delhi. Forward transactions are entered jn various bullion markets, and on certain transactions entered into with firms at Bhatinda in the then State of Patiala certain losses of Rs. 6,366/- and Rs. 16,615/- were incurred. The question arose whether in view of the fact that according to the provisions of Section 14 (2) (c) of the income-tax Act, as it then stood, any profits resulting to the assessee from business an Indian state would be excluded in assessing the taxable income of the assessee unless such profits were brought into British India, the assessee was entitled to deduct the losses incurred on business in a native state. The appellate Tribunal held that there was no warrant either in terms of Section 14 (2) (c) or in terms of the proviso to Section 24 (1) to split up the transactions of a business located in the taxable territories into transactions in taxable territories and transactions without taxable territories and that nothing in the provisions of Section 14 (2) (c) or the proviso to Section 24 (1)debarred the taking into account of the losses incurred in this way by the assessee firm. The assessee's appeal was accordingly allowed and the losses deducted from the assessee's taxable income.
(3.) WHEN the application was made under Section 68 (2) by the Commissioner of Income-tax he not only raised this point but also raised the question of these losses in connection with the assessment for excess profits in spite of the fact that this matter had never been separately raised or considered at any stage, the orders passed regarding the excess profits being consequential on the orders of the Income-tax officer, the Appellate Assistant Commissioner and the Appellate tribunal. At the time when the application was heard it was agreed that the first matter arose, but the assessee objected to the framing of the second question. His objections on this point were, however, overruled.;
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