Malik, C.J. - (1.) THE facts of this case are very simple. THE assessee, Mishri Mal Gulab Chand, is a Hindu undivided family doing business at Beawar, Ajmer-Merwara. THE relevant assessment year is 1944-45. In the relevant account year, the assessee was a resident and ordinarily resident in British India. THE asses-see had speculated individually and in partnership in various commodities in British India and also in Indian States. From its individual business carried on in British India the assessee had made a profit of Rs. 38,473, while from its individual business in the Indian States it suffered a loss of Rs. 25,391. In computing total income from business of the assessee the Income-tax Officer did not debit the loss suffered in Indian States. This decision was upheld by the Assistant Income-tax Commissioner. On appeal the Appellate Tribunal reversed the decision of the Income-tax Commissioner and held that the first proviso to Section 24 (1) of the Act did not apply. On an application made by the Income-tax Commissioner the Tribunal has made this reference on two points. 1. Whether in the circumstances of the case the sum of Rs. 25,391 should have been ignored in determining the assessee's income from business in the previous year relevant to the assessment year 1941-45, or whether that sum should have been deducted from the assessee's income from business in the previous year relevant to the assessment year 1944-45 ? 2. Whether the first proviso to Section 24 (1), Income-tax Act could apply to assessments made for the year 1944-45?
(2.) THE second question was referred to us at the instance of the assessee as the account year 1943-44 ended on 31st of March, 1944 and the first proviso to Section 24 (1) did not come into force till 12th April 1944. Taking up the second question first, the point appears to me to be concluded by the decision of their Lordships of the Judicial Committee in Maharajah of Pithapuram v. Commissioner of Income-tax, Madras, 1945-13 I. T. R. 221. (A. I. R. (32) 1946 P. C. 89). It has been urged by Mr. Das on behalf of the department that it was the law in force at the time of assessment which governed the assessment of a particular year and not the law as it was during the year in which the income was earned. Learned counsel has cited in support of this contention two cases: (1) Commissioner of Income-tax, Bombay v. Sind Hindu Provident Funds Society, 1940-8 I. T. R. 467: (A. I. R. (28) 1941 sind 110) and (2) Commissioner of Income tax, Madras v. Maharajah of Pithapuram, 1942-10 I. T. R. 1: (A. I. R. (29) 1942 Mad. 191 SB).
(3.) IN the case of the Commissioner of IN-com-tax, Bombay v. Sind Hindu Provident Fund Society, (1940.8 I. T. R. 467 : A. I. R. (28) 1941 Sind 110), the Chief Court of Sind held that the Government notification published on 4th. April 1936, which limited the exemption of interest on securities purchased through the Post Office--to Rs. 22,500 was applicable to an assessment levied on 28th October 1937, even though the income assessed was for the year ended 31st March 1936. The learned Judge relied on the facts that an assessment in 1936-1937 based upon the income of 1935-36 would be determined not upon the rates in force in 1935-86 but the rates in force in 1936-87. This is perfectly correct but the point what would be considered to be the rate in force in 1936-37 when there was a change made in the middle of the year does not seem to have been considered by the learned Judges. In the case of Maharajah of Pithapuram, (1945-13 I. T. R. 221: A. I. R. (32) 1945 P. C. 89), the question was whether the provisions of Section 16 (1) (c), Income tax Act, as amended by the Amendment Act of 1939, was to be applied, or the law prior to the amendment. The account year was 1938-39 and the claim of the assesses was that the law prevailing in the account year when the profits were made was the law applicable. It was pointed out by a Full Bench of the Madras High Court that in the year of assessment 1939.40 the Amending Act had come into force and the law in force at the time of assessment must govern the assessment and not the law in the previous year in which the income was earned. The Amending Act, VII (7) of 1939 had received the assent of the Governor. General on 17th February 1939, and was published in the Government of India Gazette dated 25th February 1939, and had come into force on 1st April 1939. The Privy Council affirmed the decision of the Madras High Court. (See Maharajah of Pithapuram v. Commissioner of Income-tax, Madras, 13 I. T. R. 221: (A. I. R. (32) 1945 P. C. 89). Their Lordships of the Judicial Committee observed as follows: "It should be remembered that the Income-tax Act 1922, as amended from time to time, forma a code, which has no operative effect except so far as it is rendered applicable for the recovery of tax imposed for a particular fiscal year by a Finance Act. This may be illustrated by pointing out that there was no charge on 1938-39 income either of the appellant or his daughters, nor assessment of such income, until the passing of the Indian Finance Act of 1939, which imposed the tax for 1939-40 on the 1938-39 income and authorised the present assessment. By Sub-section (1) of Section 6, Finance Act, 1939, income-tax for the year beginning on 1st April 1939, is directed to be charged at the rates specified in Part 1 of Schedule II, and rates of super-tax are also provided for, and by Sub-section (3) it is provided that 'for the purpose of this section and of Schedule II, the expression "total income" means total income as determined for the purposes of income-tax or super-tax as the case may be, in accordance with the provisions of Indian Income-tax Act, 1922'. This can only refer to the Indian Income-tax Act, 1922, as it stood amended at the date of the Indian Finance Act, 1939, and necessarily includes the alterations made by the Amending Act, which had already come into force on 1st April 1939." Similar provisions are contained in Section 6, Finance Act of 1914, and on a parity of reasoning the law applicable on 1st April 1944 the assessment year being 1st of April 1944 to 31st March 1945, would be the law applicable. The answer to the second question must, therefore, be that the first proviso to Section 24 (1), Income-tax Act does not apply to assessments made for the year 1944-45. ;