RELIANCE JUTE & INDUSTRIES LTD. vs. C.I.T., WEST BENGAL, CALCUTTA

CIVIL APPEAL No. 2366/1972Supreme Court[1980] 1 S.C.R. 90610 October 1979Bench: 2 JudgesAuthor: N.L. UNTWALIA, R.S. PATHAK4 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court dismissed the appeal. It held that the unabsorbed loss of the assessment year 1950-51 could not be carried forward for more than eight years and therefore could not be set off against the business income of the assessment year 1960-61. The Court reiterated the cardinal principle of tax law that the law in force in the assessment year is to be applied unless otherwise provided. When the assessment for 1960-61 was made, Section 24(2) as amended in 1957, which limited the carry-forward period to eight years, was applicable. The Court found no vested right accrued to the assessee under the prior law that could override the law in force for the assessment year in question. The direction by the Appellate Assistant Commissioner to carry forward the loss was rendered ineffective as it was based on an assumption not supported by the law applicable to the assessment year 1960-61. The Court distinguished the case of Commissioner of Income Tax, Kerala v. Helen Rubber Industries Ltd.

What were the facts?

The assessee, Reliance Jute & Industries Ltd., is challenging an order related to the assessment year 1960-61. For the assessment year 1959-60, the Income Tax Officer set off unabsorbed business losses from 1949-50 and 1950-51 and directed the remaining unabsorbed loss of Rs. 15,50,189 to be carried forward. In the assessment for 1960-61, the assessee claimed to set off this loss. The Income Tax Officer rejected the claim, stating the loss from 1950-51 could not be carried forward for more than eight years. This was upheld by the Appellate Assistant Commissioner and the Appellate Tribunal. The High Court answered a reference against the assessee. The assessee appealed to the Supreme Court.

What were the issues?

1. Whether the assessee had acquired a vested right under Section 24(2)(iii) of the Indian Income-Tax Act, 1922, as it stood before the 1957 amendment, to carry forward unabsorbed losses indefinitely, and if the subsequent amendment limiting the carry-forward period to eight years could divest this right? Assessee's contention: The assessee argued that by virtue of Section 24(2)(iii) as it existed before the 1957 amendment, it had acquired a vested right to carry forward unabsorbed losses until completely set off. They contended that the subsequent amendment, which was not retrospective, could not take away this accrued vested right. Revenue's contention: The revenue implicitly argued that the law in force during the relevant assessment year (1960-61) should apply, and the amendment limiting the carry-forward period was applicable.

Which sections of the Income-tax Act were involved?

Section 24(2)(iii), Section 66-A(2)

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A • c D F 906 RELIANCE JUTE & INDUSTRIES LTD. v. C.I.T., WEST BENGAL, CALCUTTA October 10, 1979 (N. L. UNTWALIA AND R. S. PATHAK, JJ.] Indian Income Tax Act 1922-S. 24(2) (iii)-Assessee if could clabn vested' right under the law as it stood before amendment-Law to be applied is the law In relevant aJsessment year.

Section 24(2)(iii) of the Indian Income-Tax Act, 1922 as it stood in 1955 provided· that a business loss which was not wholly set off should be carried' forward from year to year.

Jn consequence of an amendment to the section made in 1957" the carry forward of unabsorbed loss could not be effected for more than eight years.

After setting off unabsorbed losses for the assessment years 1949-50 and 195().51 the Income Tax Officer directed that the loss remaining unabsorbed ID the year 1950-51 be carried forward.

The assessee's plea that the unabsorbed loss of the year 1950-51 should be set off against the business income of the assessment year 1960-61 was rejected by the Income-Tax Officer on the ground that the unabsorbed·,.,.. of the year 1950-51 could not be carried forward for more thao eight years.

The asse~ee was unsuccessful in appeal befor

The order continues below.

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