COMMISSIONER OF INCOME-TAX, UTTAR PRADESH versus MANMOHAN DAS

Citation: [1966] 2 S.C.R. 531 · Decided: 05-11-1965 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Dismissed

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Judgment (excerpt)

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531 
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COMMISSIONER OF INCOME-TAX, UITAR PRADESH 
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MANMOHAN DAS 
November 5, 1965 
[K. SUBBA RAo, J. C. SHAH ANDS. M. S!KRI, JJ.] 
Income-tax Act (11 of 1922), ss. 10 and 24-Treasurer of Bank-If 
"vocarion"-Right of assessee to carry forward loss of one year to subse-
qllent year and set off against profit-Scope of. 
The respondent was appointed Treasurer of a Bank in respect of 
certain of its branches, sub-agencies and pay offices. 
In the pre,·ious 
year corresponding to the assessment year 19)0-51, he suffered a loss in 
performing his duties as Treasurer. But the Income-tax Officer, in assess-
ing the respondent to income-tax, declared that the loss could not be 
carried forward to the next year under s. 24(4) of the Income-tax Act, 
1922, on the ground that it was not a business loss. For the assessment 
year 1951-52, the Income-tax Officer refused lO allow the loss to be set 
off against the net profit for the year and brought that amount of profit 
to tax as remuneration received by the respondent as Treasurer of the 
Bank. The order was confirmed by the Appellate Assistant Commissioner.. 
but. the Appellate Tribunal held that the remuneration received by the 
respondent was income arising from the pursuit of a profession or vocation 
within the meaning of s. 10 of the Act and therefore the loss suffered 
during the preceding year could be set off against his income in the subse-
quent year. On a reference the High Court agreed with the Tribunal. 
In appeal to this Court, 
HELD : (i) The decision recorded by the Income-tax Officer, who 
computed the loss in the previous year under s. 24(3), that the loss could 
not be set off against the income of the subsequent year was not binding 
on the respondent, as, under s. 24(2), it is for the Income-tax Officer 
dealing with the assessment in the subsequent year to determine whether 
the loss of the previous year may be set off against the profits of that 
year. [534 A-CJ 
(ii) The use of the expressions "serve the Bank" and "in the service 
of the Bank" in the contract appointing the respondent as Treasu:er of 
the Bank have to be read in the setting of the other convenants and are· 
not decisive of the question whether the respondent was a servant of 
the Bank. Under the contract the respondent had to procure due perform-
ance of the duties of the cash department by employees under his super-
vision and he was to be responsible for all acts done by them and to 
make good the loss which might result from any embezzlement, theft, 
fraud, misappropriation, mistake, 
misconduct, 
omission, negligent 
act 
or default of any such person. In carrying out his duties under the contract 
he was not to be controlled or supervised by the Bank and the agreement 
was not liable to summary determination. The contract was therefore for 
service and the respondent could not be called a servant of the Bank . 
Therefore, the remuneration received by him was not "salaries" within· 
the meaning of s. 7 of the Act. [538 F-G; 540 E-F; 543 BJ 
Section 24(2) confers a statutory right upon the assessee who sustains 
a loss of profits in any year in any business, profession or vocation to 
carry forward so much of the loss as is n?t set .off under sub-s .. 0) t.o 
the following year, and to set it off against hts profits and gams, if 
532 
SUPREME COURT REPORTS 
(1966] 2 S.C.R. 
.any, from the same business, profession or vocation for that year. The 
A 
occupation of a Treasurer is not a profession, nor does it partake of the 
·Character of a business or trade. But taking into consideration the nature 
of the duties performed, and the obligation undertaken, together with 
the right to remuneration subject to compensation for loss arising to the 
Bank from his own acts and omissions or of the servants introduced by 
him into the business of the Bank, the respondent could be regarded as 
following a vocation. 
His remuneration must therefore be computed 
·under s. 10 and loss of profit suffered in that vocation in any year could 
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be carried forward to the next year and be set off against the profit of 
that year. 
[543 B, C-D, F-G] 
Dharangadhara Chemical Works Ltd. v. State of Saurashtra, [1957] 
S.C.R. 152, followed. 
Shivnandan Sharma v. The Punjab National Bank Ltd. [1955] 1 S.C.R. 
1427 and Piyare Lal Adishwal Lal v. Commissioner of Income-tax, Delhi 
40 I.T.R. 17, distinguished. 
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 512 of 
1964.

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