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

Citation: [1987] 2 S.C.R. 1159 · Decided: 22-04-1987 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Dismissed

Judgment (excerpt)

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 disallowed 
by the Income-tax Officer on the footing that when in the assessment 
year 1957-58 the loss was claimed it was excluded in the computation of 
income as capital loss. A challenge to that order by the assessee was 
rejected by the Appellate Assistant Commissioner who took the view 
that the loss was essentially notional in nature, and that the claim for set 
oft'to be admissible, had to be notified by the Income-tax Officer under 
. s. 24(3) of the 1922 Act to the assessee by an order in writing. That 
having not been done the claim was not admissible. 
E 
F 
G 
Allowing the assessee's claim, the Tribunal however, came to the 
conclusion that the assessee was entitled to the benefit of set off of loss 
..,i 
provided it satisfied that capital IOss was computed under the old Act, 
and as in the instant case the Income-tax Officer bad neither computed 
the loss nor passed an adverse order, the Income-tax Officer was not 
entitled to take advantage of his own failure and reject the assessee's 
H 
1159 
1160 
SUPREME COURT REPORTS 
[1987] 2 S.C.R. 
., 
A claim on the ground that loss had not been determined as required 
under s. 24(3) of the Income-tax Act, 1922. 
y 
The High Court agreed with the conclusion of the Tribunal and 
found against the Revenue. 
B 
Dismissing the Appeal. the Court, 
HELD: Reading the. provisions of s. 74(l)(b) and s. 80 of the 
.. 
Income-tax Act, 1961 together makes it evident that the benefit confer-
red under s. 24 of the 1922 Act has been continued to be given effect to ....... -· 
under the 1961 Act, and notwithstanding the words of s. 80 of the latter 
c Act, the claim of set off was admissible. The conclusion reached by the 
High Court was. therefore, correct. [II66CD] 
The Income-tax Officer in the instant case, did compute the } 
amount by specifying it in his assessment order. When the assessee had 
made the claim and the Income-tax Officer took note of it, his failure to 
D comply strictly with the requirement of sub-s. (3) of s. 24 of the 1922 
Act could not be permitted to be taken advantage of by the Revenue. 
nor could it be used to the prejudice of the assessee. [II64D] 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 74 of 
-+ 
1975. 
E 
From the Judgment and Order dated 9.11.1973 of the Allahabad 
......
High Court in I.T. Ref. No. 722of1971. 
S.C. ·Manchanda, Ms. A. Subhashini and M.N. Tandon for the 
..... 
F 
Appellant. 
J.P. Goyal. Rajesh, Mali Ram Bidwar. and D.P. Mukherjee for 
y 
the Respondent. 
The Judgment of the Court was delivered by 
G 
RANGANATH MISRA. J. This appeal is by special leave and 
the judgment of the Allahabad High Court on a reference under Sec-
tion 256(1) of the Income Tax Act, 1961 (hereinafter referred to as 
'tlie A~t') is assailed by the Revenue . 
• 
The relevant assessment year is 1965-66 corresponding to the 
H previous year ending on 3l.12.1964. In its return the assessee. a pri-
C.l.T. v. BEHARI LAL [MISRA, J.] 
1161 
vate limited company, disclosed capital gains of Rs.3, 10,200 but 
claimed set off of capital loss of Rs.3, 17,500 sustained by it during the 
assessment year 1957-58 over sale of shares to three associate con-
cerns. It was maintained by the assessee that the loss was sustained in 
the previous year relevant to the assessment year 1957-58 a

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