- (1.) This appeal brought on a certificate of the High Court raises a point of far-reaching consequence as to the interpretation of Ss. 8, 10 and 24 (2), Income-tax Act (hereinafter termed the Act.)
(2.) The assessee (who is the appellant before us) claims that in the computation of its profits for the assessment year under review (1945-1946), it is entitled to set off the carried over loss of the previous year against the profits of the year of assessment under S. 24 (2) of the Act. The assessee is a Bank carrying on banking business. For the assessment year its assessable income was computed by the Income-tax Officer at Rs. 14,95,826 "by splitting up" its income into 2 heads ............. "interest on securities" and .............. "business income". "interest on securities" in the year of assessment was Rs. 23,62,815 and under the head "business income" there was a loss of Rs. 8,86,972. After making the necessary adjustments and deducting the business loss from "Interest on securities", the net income was determined at Rs. 14,95,826. In the previous year there was a loss of Rs. 3,21,929 which was computed by setting off the business loss against "interest on securities".
(3.) Before the Income-tax Officer the assessee made its claim on the basis that it was a part of "the business of the Bank to deal in securities" ................ and "that no distinction should be made between income from securities and income from business for the purpose of set off under S. 24". It also claimed that it carried on only one business, namely banking as defined by S. 277 F, Companies Act in the course of which the "Bank has to receive money on deposits and invest such deposits in securities, loans and advances" and therefore holdings of securities by it could not be treated as its separate business. The Income-tax Officer was of the opinion that as there was a loss under the head "business" its claim could not be sustained and hence it could not be set off under S. 24 (2) of the Act.;