COMMISSIONER OF INCOME-TAX, KANPUR vs. BEHARI LAL RAM CHARAN LTD.

CIVIL APPEAL No. 74/1975Supreme Court[1987] 2 S.C.R. 115922 April 1987Bench: 2 JudgesAuthor: R.S. PATHAK, RANGANATH MISRA OF INCOME8 pages
AI SummaryDismissed

What were the facts?

The assessee, Behari Lal Charan Ltd., for the assessment year 1965-66, disclosed capital gains of Rs. 3,10,200. It claimed a set-off of a capital loss of Rs. 3,17,500 sustained in the assessment year 1957-58 from the sale of shares. The Income-tax Officer disallowed the claim, stating that the loss was excluded in the computation of income for 1957-58 as it was a capital loss. The Appellate Assistant Commissioner upheld this, deeming the loss notional and requiring notification by the Income-tax Officer under Section 24(3) of the 1922 Act, which had not occurred. The Tribunal allowed the assessee's claim, finding that the Income-tax Officer's failure to compute the loss or pass an adverse order should not prejudice the assessee. The High Court agreed with the Tribunal, and the Revenue appealed.

What did the Supreme Court hold?

The Supreme Court held that the benefit conferred under Section 24 of the 1922 Act was continued under the 1961 Act. Reading Sections 74(1)(b) and 80 of the 1961 Act together, the Court found that the claim for set-off was admissible, notwithstanding the wording of Section 80. The Court agreed with the High Court's conclusion. Regarding the procedural aspect, the Court noted that the Income-tax Officer had computed the amount by specifying it in his assessment order. When the assessee made the claim and the Income-tax Officer took note of it, his failure to strictly comply with Section 24(3) of the 1922 Act could not be taken advantage of by the Revenue to the prejudice of the assessee. The appeal was dismissed.

What were the issues?

1. Whether the Income-tax Officer's order for assessment year 1957-58 merged with the Appellate Assistant Commissioner's order, which found the loss to be notional? 2. If not, whether any loss was determined for assessment year 1957-58 that could be carried forward? 3. Whether, under Section 80 of the Income-tax Act, 1961, the loss from assessment year 1957-58 could be set off against income for assessment year 1965-66? 4. Whether the Tribunal was justified in holding that Section 24(3) of the 1922 Act regarding intimation of determined losses did not apply to capital losses? Assessee's contentions: The assessee argued that the Income-tax Officer's failure to compute the loss should not be used against them, and that the benefit of set-off under the old Act was continued under the new Act. They relied on Section 74(1)(b) of the 1961 Act. Revenue's contentions: The Revenue contended that the loss was notional, that the Appellate Assistant Commissioner's order had become final, and that the claim was inadmissible as it was not notified by the Income-tax Officer under Section 24(3) of the 1922 Act. They also relied on Section 80 of the 1961 Act.

Which sections of the Income-tax Act were involved?

Section 24,Section 74,Section 80,Section 139,Section 71,Section 72,Section 73,Section 74A,Section 256(1)

AI-generated summary — verify with the full judgment below

COMMISSIONER OF INCOME-TAX, KANPUR v. ·BEHAR! LAL RAM CHARAN LTD.

Ai>Rit 22, 1987. [R.S. PATHAK CJ, AND RANGANATH MISRA, J.] Income-tax Act, 1961: ss. 74 and BO-Claim of set off-When admissibl~Assessee whether entitled to benefit conferred under s. 24 of 1922Act. A B Sub-section (3) llf s. 24 of the Income-tax Act, 1922, required that C when it was estabilshed that a loss of profits or gains had taken place. which the assessee was entitled to have set off, the Income-tax Officer ~hould notify lb the assessee by an order In writing the amount of loss as ·computed by him. This benefit was continued in s. 74 of the Income-tax Ad; i961 Which provides for carrying forward to the fol- D lowing years tile net loss computed under the head 'capital gains' in respect.of an assessment year, Section 80, however, interdicts that no los.s which has not been so determined shall be carried forward and set off.

The assessee, a private limited company disclosed in its return for . the assessment year 1965·66 capital gains of Rs.3 lacs and odd but claimed set off of capital loss of a like amount sustained during the assessment year 1957,58 over sale of shares. This claim was di

The order continues below.

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