Law:

Section:

Section 71 of the Income-tax Act, 1961 [Corresponding to section 24(1) of the Indian Income-tax Act, 1922] - Loss - Set off of from one source against income from another - Assessment year 1949-50 - Assessee company had only one source of income and, loss suffered by it in previous year was in respect of same business - Whether assessee was not entitled to set-off of loss, if any, in earlier years against profits of current assessment year in respect of same business - Held, yes FACTS The assessee company was exploring and prospecting the mineral and forest resources and had only one source of income. In response to a notice under section 22(2) for the assessment year 1948-49 the assessee filed a 'nil' return with a covering latter stating that it suffered a gross loss during the previous year. For the assessment year 1949-50, the assessee filed return of income declaring a loss. The authorities found that the loss was never proved. The contention on behalf of the assessee before the Tribunal that the Income-tax authorities should set off against the profit of the previous year the loss of earlier years under the provision of section 24(2) was, therefore, negatived. On reference : HELD The provisions of section 24 were interpreted by the Supreme Court in the case of Anglo-French Textile Co. Ltd. v. Commissioner of Income-tax [1953] 23 ITR 82 wherein it was held that section 24 (1) of 1922 Act, provides that where an assessee sustained a loss of profit or gains in any of the heads mentioned in section 6 he would be entitled to have the amount of the loss 'setoff against his income, profits or gains under any other head in that year.' Therefore, before any question of set-off could arise, there must be (I) a loss under one or more of the heads mentioned in section 6, and (2) an income, profit or gain under some other head. In the instant case the assessee had only one source of income, that is, profits and gains of business. The alleged loss also was in respect of the same business and, as such, the decision of the Supreme Court fully answered the point which arose in the present case. The assessee was not entitled to a set-off of the loss, if any, in the…

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