Law: Business Profits Tax Act, 1947

Section: 5,3

Business Profits Tax Act (XXI of 1947)----S. 5, proviso 3­ Business-Profit in British India-Loss in business in native State--Loss whether to be taken into consideration in ascertaining business profits-"Income, profits or gains"-Meaning. The assessee which held the managing agency of a company in British India and also carried on a pharmaceutical business in the native State of Baroda without British India, during the relevant chargeable accounting periods, showed profit in the managing agency business but incurred losses in the pharmace­utical business in the native State. The question was whether in ascertaining the business profits of the assessee for the purposes of the Business Profits Tax Act, 1947, the losses incurred in the native State reduced the British Indian profits of the assessee: Held, that the third proviso to section 5 of the Business Profits Tax Act took out of the ambit of the Act merely the "income, profits or gains" of a business in an Indian State and did not exclude the business itself. The loss suffered by the assessee in the pharmaceutical business carried on in the State of Baroda had to be deducted in computing the business income of the assessee for the purposes of the business profits tax. The expression "income, profits or gains" in the third proviso to section 5 of the Business Profits Tax Act, in its context, does not include losses. Karamchand Premchand Ltd. v. Commissioner of income-tax (1956) 30 I T R 849 affirmed. Commissioner of Excess Profits Tax v. Bhogilal H. Patel (1952) 21 I T R 172 ; Commissioner of Income-tax v. Indo-Mercantile Bank Ltd. (1959) 36 I T R 1 ; Commissioner of income-tax v. Murlidhar Mathurawalla Mahajan Association (1948) 16 I T R 146 ; Commissioner of Income-tax v. Somasundaram Chettiar A d R 1928 Mad. 487 ; Provident Investment Co, Ltd. In re : (1932) I L R 56 Bom. 92 ref. JUDGMENT S. K. DAS, J.-This is an appeal on a certificate of fitness granted by the High Court of Bombay, and the short question for decision is the true scope and effect of the third proviso to section 5 of the Business Profits Tax Act, 1947 (XXI of 1947), hereinafter referred to as the Act. The appellant is the Com­missioner of…

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