- (1.) This reference has been received from the Income Tax Appellate Tribunal (hereinafter shall be referred to as 'ITAT') at instance of Assessee State Bank of Bikaner and Jaipur. Question that has been referred to this Court for answer under Section 256 (1) of the Income Tax Act, 1961, reads as under: Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the applicant was not entitled to set off of the brought forward losses of the State Bank of Jaipur?
(2.) Factual matrix of case is that prior to 1st January, 1963 Assessee Bank was named as State Bank of Bikaner only. This Bank acquired assets and liabilities of State Bank of Jaipur under Section 38(2) of the State Bank of India (Subsidiary Banks) Act, 1959 vide order dated 18th December, 1962 passed by Government of India, Ministry of Finance, Department of Economic Affairs. Assessee claimed set off regarding carried forward losses in respect of business of State Bank of Jaipur which merged with it under Section 38 of the Act of 1959. It was claimed by Assessee that business of State Bank of Jaipur remained in continuity and was carried on by State Bank of Bikaner and Jaipur. It was claimed that loss of Rs. 58,328 pertaining to State Bank of Jaipur for assessment year 1963-64 should be allowed to be carried forward and set off against profits of Assessee. Assessing Officer rejected claim vide order dated 17.08.1978. Assessee Bank preferred an appeal before Commissioner of Income Tax (Appeals) against order of assessing officer but the same was rejected vide order dated 16.06.1979. Further appeal filed by Assessee against both orders was also rejected by ITAT vide order dated 28.02.1981. Assessee thereafter filed an application under Section 256(1) of the Act of 1961 before ITAT for referring the above referred to question to this Court. It is in this background that present reference has been received.
(3.) Shri P.K. Kasliwal, learned Counsel for Assessee, has argued that present case squarely falls within the scope of Section 78(2) of the Act of 1961 which inter alia provides that even in cases, where a person carrying on any business or profession, has been succeeded in such capacity by another person, otherwise than by inheritance, nothing contained in said Act shall entitle any person other than the person incurring the loss to have it carried forward and set off against his income. Since present one was a case of succession by inheritance, Assessee would be entitled to set off regarding process pertaining to State Bank of Jaipur for assessment year 1963-64. It was argued that ITAT has erred in law in holding that law of inheritance is applicable only to living person and not to jurisdictional person and therefore, the claim has wrongly been rejected. Learned Counsel referred to provisions contained in Section 2(31) of the Act of 1961 to argue that person for the purpose of Act of 1961 would be a legal person, which would include a Company, it being a juridical person, what is barred in Section 78(2) of the Act of 1961 to be carried forward and set off against income is the loss incurred by otherwise by any inheritance. In other words, loss derived by inheritance would be open to be carried forward and set off against income. Learned Counsel further argued that ITAT failed to consider that all assets and liabilities of State Bank of Jaipur were taken over by State Bank of Bikaner, which hitherto came to be known as State Bank of Bikaner and Jaipur, old business of State Bank of Jaipur was continued after its merger with State Bank of Bikaner by the latter. Mere change of name would not detract from the issue that loss suffered by earlier Bank is loss of Assessee Bank on merger and it should be allowed to be set off against income of Assessee in succeeding assessment year.;