K.L.Roy, J. - (1.) The petitioner is a sterling company with its head office in London carrying on business in tea in the United Kingdom. It also holds shares in different tea companies in other parts of the world. It has dividend income in India from its shares in M/s. Brooke Bond (India) Ltd, which is its 100 per cent. subsidiary company. The petitioner claims that it also carries on the business of investing monies in shares of tea companies and its income from dividend is income from its business. It is to be noted that the petitioner's status for any particular assessment year depends on whether its income in India exceeds or is less than its income outside India. For the assessment year 1956-57, the First Additional Income-tax Officer, Companies District I, Calcutta, on the 28th March, 1957, completed the assessment of the petitioner in the status of a non-resident in respect of its dividend income in India only and determined the total income at Rs. 53,11,958. The assessment for the immediate preceding year 1955-56 was made by the said Income-tax Officer, on the 16th July, 1957, and for this year, as the income in India exceeded the income outside India, the petitioner's status was taken as resident and ordinarily resident and after deducting the net loss computed from the petitioner's business in the United Kingdom at Rs. 65,61,147 from its Indian dividend income of Rs. 34,27,500, the net lo^ for this year was determined at Rs. 31,33,647. The assessment for the subsequent year 1957-58 was again made in the status of a nonresident some time in November, 1957, only on the total dividend income in India of Rs. 51,85,837. As the assessment for 1956-57 was made before the assessment for 1955-56, the petitioner claimed to set off its loss carried forward from the year 1955-56 against its assessed income for 1957-58 and appealed against the order of assessment for the later year to the Appellate Assistant Commissioner. By his order dated the 14th August, 1958, the Appellate Assistant Commissioner dismissed the petitioner's appeal, inter alia, on the ground that under Section 24(2) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the Act"), the loss sustained in any year could be carried forward and set off against the profits, if any, of the following year and the loss of 1955-56 could not be set off against the income for 1957-58 without first being set off against its income for 1956-57. The petitioner had, in the meantime, on the . 12th February, 1958, made two applications to the respondent, Commissioner, under Section 33A(2) of the Act for, (1) the determination of the loss to be carried forward in the assessment for the year 1955-56 which had been omitted by the Income-tax Officer, and (2) for the set off of the loss carried forward from the year 1955-56 against the dividend income of the subsequent year as such dividend income formed part of the petitioner's business income or in the alternative for set off of the unabsorbed depreciation carried forward from the year 1955-56. The petitioner also filed an appeal against the aforesaid order of the Appellate Assistant Commissioner to the Income-tax Appellate Tribunal and by its order dated the 1st July, 1966, the Tribunal allowed the appeal holding that the Appellate Assistant Commissioner was not justified in refusing to set off any loss carried forward from 1955-56 against the income for the year 1957-58 as such loss was entitled to be set off against the income of any subsequent year. The Tribunal recorded the petitioner's claim that in investing monies in shares in foreign tea companies it was carrying on a business and the income from dividend from such shares was its business income but left open the question whether the loss from business carried forward from 1955-56 could be set off against the said dividend income in the subsequent years. An application under Section 66(1) of the Act to the Tribunal for reference of a certain question of law to the High Court was made by the respondent, Commissioner, and the annexure to that application being statement of the facts which were admitted and/or found by the Tribunal and which were necessary for drawing up a statement of the case contained the following words, viz.: "The assessee is a sterling company with its head office in London carrying on business in tea in the United Kingdom. It also carries on the business of investing moneys in shares of companies in other parts of the world which carry on the business of growing, manufacturing and selling tea exclusively. The assessee's income from dividend, though treated by the assessee as income from business, is taken for the assessee's assessment under the Indian Income-tax Act as income from other sources."
(2.) It would be seen that this is a repetition of the recital contained at the beginning of the Tribunal's aforesaid order and this fact would be material as much was sought to be made out of this statement by Mr. Ray. The aforesaid application was dismissed by the Tribunal on the 1st December, 1966. On the 5th December, 1966, the respondent. Commissioner, passed a consolidated order on the said two applications under Section 33A(2) made on the 12th February, 1958. He allowed the first application and directed the Income-tax Officer to determine the loss to be carried forward in the assessment for 1955-56. But he dismissed the petitioner's claim for set off against the dividend income for 1956-57, inter alia, on the following grounds, (1) that the dividend earned by the petitioner-company from investments in shares of companies carrying on tea business could never be said to be a part of its business income because investments in shares were hot incidental to the petitioner's business activities and as they were not incidental to the petitioner's business activities they were not held as trading assets ; (2) that the companies from which the dividend income was earned were not companies of which the petitioner-company was the managing agents so as to require making of such investments for the purpose of the business of such managing agents. Accordingly, the Commissioner held that such dividend income could not be considered to be the petitioner's business income and the loss carried forward from the petitioner's business in the United Kingdom could not be set off against such dividend income under Section 24(2) of the Act. In coming to this conclusion the respondent. Commissioner, considered and discussed the three decisions of the Supreme Court relied on by the petitioner's advocate before him and also cited in the written arguments submitted by him, namely United Commercial Bank Ltd. v. Commissioner of Income-tax, Commissioner of Income-tax v. Chugandas & Co., Commissioner of Income-tax v. Cocanada Radhaswami Bank Ltd., and distinguished them on the facts from the case before him. The Commissioner also rejected the petitioner's alternative claim for set off of the unabsorbed depreciation brought forward from 1955-56 and be distinguished the Supreme Court's decision in Jaipuria China Clay Mines (P.) Ltd. v. Commissioner of Income-tax, relied on by the petitioner on the ground that the unabsorbed depreciation of the earlier year could be set off against the income under the other heads only when there was business income in the current year and the unabsorbed depreciation brought forward from the earlier year formed a part or whole of the depreciation allowance claimed to be set off against the income from that business.
(3.) The application for a rule was made to this court on the 11th May, 1967, and was dismissed by B. C. Mitra J. An appeal from the order of dismissal was taken and by its order dated the 21st December, 1967, the appellate court allowed the appeal, set aside the order refusing the rule and directed the issue of a rule nisi as prayed for ; the cost of the appeal was to abide by the result of the rule nisi.;