DALMIA JAIN AND COMPANY LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee in this case is a private limited company. THE assessment year in question is 1954-55, the corresponding accounting period being February 1, 1953, to January 31, 1954. During the said accounting period, the assessee climbed to have paid interest to the tune of Rs. 79,265 on borrowed capital utilised in the construction of a houses by the assessee in Calcutta. THE construction began in 1950 and was completed in April, 1952. THE house was let out to Shri S. P. Jain, his son, Shri Ashok Kumar Jain, and some sister companies of the Sahu Jain group. A sum of Rs. 12,000 was shown as rent received of this building and a set of furniture therein. Deduction one-sixth for repairs, the net income from the building could be determined at Rs. 10,000, if it was chargeable to tax under the head "Income from property". But since the erection of the building was begun and completed between 1st day of April, 1946, and the 31st day March, 1956, its income was not chargeable under the head aforesaid for a period of two years from the date of the completion of the building as provided in clause (xii) of sub-section (3) of section 4 of the Indian Income-tax Act, 1922, hereinafter called the Act. THE assessee-company claimed loss of Rs. 69,265 (Rs. 79,265-10,000) under the head "Income from property" and further claimed to set it off against its income from other heads. THE claim was rejected by the income-tax authorities and also by the Appellate Tribunal on the ground that when the income from property in respect of the building in question was not chargeable to tax, there was no question of determining any loss in relation to that building nor could the loss, if any, be allowed to be set off against the income for other heads under section 24(1) of the Act. On being asked by the assessee, the Income-tax Appellate Tribunal Patna Bench, has stated a case and referred to the High Court under section 66(1) of the Act, the following question of law

(2.) WHETHER, in the facts and circumstances of the case, the sum of Rs. 69,265 being the loss under the head "Property income", which income is exempt from taxation under section 4(3) (xii), should have been set off against the assessee income under other heads ?

(3.) WHERE any assessee sustains a loss of profits or gain is any year under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or under any other head in that year."