CROWN HOTEL NEW DELHI Vs. COMMISSIONER OF INCOME TAX DELHI

JUDGEMENT

(1.) The following question has been referred to this Court under section 66(2) of the Indian Income-tax Act 1922 (hereinafter referred to as the Act) in pursuance of an order made by the Court on 16th March, 1965:

(2.) The assessee in this case derives income from various sources including hotel as well as race-course betting. During the assessment year 1955-56 he made profit in the hotel business but suffered loss in the business of race-course betting done by him at Delhi in his individual capacity. The assessee was also .a partner in race-course betting business at Bombay and Poona. After setting off the loss in individual race-course betting business at Delhi against the profits earned in other businesses, a net loss of Rs. 6,889.00 was carried forward to the assessment year 1956-57 which is the year under reference. During the assessment year 1956-57, the assessee made a profit of Rs. 22,477.00 in the hotel business. As against that he set off his share of loss amounting to Rs. 5,432.00 suffered by him in the race-course betting business at Bombay and Poona done under the name and style of M/s. Sharif and Manohar. The total income was thus determined to be Rs. 17,045.00. The assessee claimed that the loss of Rs. 6,889.00 brought forward from the earlier year 1955-56 and sustained by him in the race-course betting business done at Delhi in his individual capacity should be set off against the income determined for the previous year. The assessee's claim in this respect was rejected by the Income-tax Officer. He observed that the brought forward loss from race-course betting business could not be set off against that year's income as there was no income from this source. The matter then came up in appeal before the Appellate Assistant Commissioner. The Assistant Commissioner held that the race-course betting business was continued during the previous year in partnership with another. The Appellate Assistant Commissioner accordingly came to the conclusion that the assessee was entitled to the set off of the brought forward loss of Rs. 6,889.00 in accordance with the provisions of section 24(2) of the Act. An appeal was filed against the order of the Appellate Assistant Commissioner to the Income Tax Appellate Tribunal. The Tribunal noted that the loss was suffered by the assessee in the race-course betting business at Delhi during the assessment year 1955-56. It was, however, the common case of the parties that no race-course betting business was done by the assessee at Delhi during the year under reference. The only race-course betting business done by the assessee during the year was at Poona and Bombay in partnership under the name and style of Sharif and Manohar. The Tribunal observed that no material had been put forward by the assessee to show that the business done in partnership at Bombay and Poona was continuation of the business done by the assessee in the preceding year in his individual capacity at Delhi ; it being the common ground that the business done at Delhi was not done during the previous year. The tribunal held that since the assessee had not established that the business at Delhi in race-course betting in which the loss had been suffered in 1955- 56 assessment was continued in the previous year, he could not claim the set off thereof under the provisions of section 24(2). On the above facts the question referred to above has been referred to this Court.

(3.) We have heard Mr. Bawa on behalf of the assessee and Mr. Kirpal on behalf of the Department and find that the answer to the question referred depends upon the provisions of subsection (2) of section 24 of the Act which reads as under :