H. D. DEVASIA & CO., KERALA versus COMMISSIONER OF INCOME TAX, KERALA

Citation: [1979] 3 S.C.R. 1271 · Decided: 04-05-1979 · Supreme Court of India · Bench: N.L. UNTWALIA · Disposal: Dismissed

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Judgment (excerpt)

-
H. D. DEV ASIA & CO., KERALA 
v. 
COMMISSIONER OF Jl\:C0,\1E TAX, KERALA 
May 4, 1979 
12 71 
[N. L. UNTWALIA, R. S. PATHAK AND E. S. VENKATARAMIAH, JJ.J 
Jncon1e Tax Act, 1961, Sections 73 and 75-Scopc of-Losses in specula-
1ion business-A registrred [inn is not entitled tO ha1·e its losses in spec11fatio11 
business carried forward for set off agoin~·t future profits in sprcufation 
busi-
ness. 
Any such loss sludl be apportionrd between the partners of the firn1 and 
they (the partners) alone shall be entilled to ha\"e thr a111ount of the loss 
set 
-0f/ and carried forward for set off under Section 73. 
The assessee-appellant is a registered firn1 carrying on business at several 
places in the State of Kerala. Apart from it'i regular trade in various commo-
dities, the assessee \Vas also carrying on a business in speculation. 
In respect of the loss'es- during the Msessment years 1964-65, 1965-66 and 
the profit during the assessment year 1966-67, the Income Tax Officer appor-
tioned the aforesaid losses and profits amongst the partners and rejected the 
assessee's contention that the losses in speculation business should be can·ied 
forward and set off against the profit in the said business made in the assess-
ment }'ear 1966-67. 
But the Appellate Assistant Commissioner, following the 
decision of th;is Court in C.I.T., Gujarat v. Kantilal Nathuchand Sarni, [1967] 
1 SCR. 813 accepted the assessee's stand. The Tribunal on second appeal 
answered in favour of the Revenue and the High Court also answered 
the 
reference against the assessee. 
Dismissing the appc&ls by special leave the Court, 
HELD : 1. The case of Kantilal Nathu Chand was decided on a true inter-
<111 
) pretatioa of Section 24(1) of the Income Tax Act 1922 and the two provisions 
~-., ar>pended thereto. 
But the provisions of law contained in Chapter VI of the 
• 
\ 
1961 Act have made a considerable departure from the corresponding provisions 
of the 1922 Act. 
[1274A, B-D] 
-· 
It is clear from the provisions of Section 73 of the 
1961 
Act that the 
assessee's loss in speculation business cannot be set off except against profits 
and gains, if any, of another sp'eculation business. 
[1275B[ 
2. For the purpose of set off it is permissible to carry forward the losses 
to the following assessment year or years subject to the limit of eight years as 
provided in Section 73 of the 1961 Act. 
[1275C] 
:i. The provision contained in Sub-section (2) of Section 73 of the 1961 
Act is "subject to the other provisions of this Chapter", which includes section 
15. Under section 15 where the assessee is a registered firm, for the purpose 
of set off and carry forward of the loss apportionment between the: partners of 
the finn has got to be made and they alone are entitled to have tfo' amount of 
the loss set off and carried forward for set off. The m•tter is put beyond any 
A 
B 
c 
D 
E 
F 
G 
B 
1272 
SUPREME COURT REPORTS 
[1979] 3 S.C.R. 
A 
pale of dOubt and challenge in sub-section (2) of section 75 when it says. that 
nothing contained in sub section (2) of section 73 shall entitle any 
assessee, 
being a registered firm to have its loss carried forward and set off under the 
. provisions of Section 73(2). 
[1275D·E] 
B 
C.l.T., Gujarat v. Kamila/ Nat/111 Chand, 63 !TR 318=[1967] 1 SCR 813; 
distinguished. 
C.l.T., Gujarat Ill v. Dhanji Shamji, 97 I.T.R. 
173 
Chowdary 
Cotton 
' 
Ginning and Processing Factory v. C./.T., Punjab 109, l.T.R. p. 6; approved. 
c 
D 
M. G·. De\·asia & Co. v. C.l.T., Kera/a, 90, I.T.R. 523; affirmed. 
CIVIL APPELLATE JURISDICTION'. Civil Appeals Nos. 2716-2718 ot 
1972. 
Appeals by Special Leave from the Judgment and Order dated 
the 14-7-1972 of the Kerala High Court in Income Tax Reference 
Nos. 100, 101 and 102 of 1970. 
WITH 
CIVIL APPEAL Nos. 365-367 of 1978. 
From the Judgment and Order dated the 24th May, 1977 of the 
Kerala High Court in I.T.R. Nos. 55, 56 and 57 of 1975 . 
.I. L. Nain and Mrs. Saroja Gopalakrishnan for the Appellant in 
E 
all the appeals. 
F 
G 
P. !. Francis, S. P. Nayar and Miss A. Subhashini for Respondent 
in all the appeals. 
The Judgment of the Court was delivered by 
UNTWALIA J.-These six appeals have been heard together as a "4 
common question of law in relation to the assessment of the same 
assessee ari$es 1in them. 
Civil Appeals 2716-2718 of 19(2 relate 
·to the assess_ment years 1964-65, 1965-66 and 1966-67. The assessee 
appellant is a regi~tered firm carrying on business 

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