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PETITIONER: RELIANCE JUTE & INDUSTRIES LTD.

       Vs.

RESPONDENT: C.I.T., WEST BENGAL, CALCUTTA

DATE OF JUDGMENT10/10/1979

BENCH: PATHAK, R.S. BENCH: PATHAK, R.S. UNTWALIA, N.L.

CITATION:  1980 AIR  251            1980 SCR  (1) 906  1980 SCC  (1) 139

ACT:      Indian Income  Tax Act  1922_s. 24(2)(iii)-Assessee  if could claim  vested right  under the  law as it stood before amendment-Law  to   be  applied   is  the  law  in  relevant assessment year.

HEADNOTE:      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. In  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 1950-51  the Income  Tax officer directed that the  loss remaining  unabsorbed in  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 loss of the year 1950-51  could not  be carried  forward for  more  than eight years.      The assessee  was unsuccessful  in  appeal  before  the Appellate Assistant Commissioner and the Appellate Tribunal. The High Court answered the reference against the Assessee.      In appeal to this Court it was contended that by virtue of s.  24(2) (iii)  of the  Act,  as  it  stood  before  its amendment in  1957, the assessee had acquired a vested right to have  the unabsorbed  loss carried  forward from  year to year until it was completely set off and that the subsequent amendment limiting  the period  to  eight  years  could  not divest the  assessee of  the vested right already accrued to him.      Dismissing the appeal, ^      HELD: The  unabsorbed loss of the assessment year 1950- 51 could  not be  carried forward  for more than eight years and consequently  could not  be set off against the business income of the assessment year 1960-61. [909 C]      1. (a)  It is  a cardinal principle of the tax law that the law  to be  applied is  that in  force in the assessment

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year unless  otherwise provided  expressly or  by  necessary implication right  claimed by  an assessee  under the law in force  In   a  particular   assessment  year  is  ordinarily available only  in relation  to a  proceeding pertaining  to that years. [908 G, 909 B]      Commissioner of  Income Tax,  West Bengal  v.  Isthmian Steamship Lines,  (1951) 20  I.T.R. 572 and Karimtharuvi Tea Estate Ltd. v. State of Kerala (1966 60 I.T.R. 262: referred to. 907      (b) When  an assessment for the assessment year 1960-61 was to be made A and s. 24(2) was invoked it was the section in force  as ill  that  assessment  year  which  had  to  be applied. There is no question of the assessee possessing any vested right under the law as it stood before the amendment. [908 H, 909 A-B]      2.   The   direction   of   the   Appellate   Assistant Commissioner that  the unabsorbed  loss  should  be  carried forward have  meaning only  if  the  law  in  force  in  the relevant assessment  year permits  the unabsorbed loss to be carried forward into the assessment of that year the instant case the  Appellate Assistant  Commissioner assumed that the law permitted the unabsorbed loss to be carried forward into future year.  But that  was not  the  law  in  the  relevant assessment year  and therefore  the assessee could derive no advantage from that direction. [909 D-E]      Commissioner of  Income  Tax  Kerala  v.  Helen  Rubber Industries Ltd. (1962) 44 I.T.R. 714, distinguished.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 2366 of 1972.      From the  Judgment and  order dated  25-3-1971  of  the Calcutta High Court in Income Tax Ref. No. 120/69.      V. S.  Deasi, S.  R. Agarwal,  Anil  Sachthey,  Praveen Kumar  and   Miss  Bina  Gupta  for  the  Appellant.  T.  A. Ramachandran and Miss A. Subhashini for the Respondent.      The Judgment of the Court was delivered by      PATHAK, J: This appeal by certificate under section 66- A(2) of  the Indian  Income Tax  Act, 1922 raises a question involving the  interpretation of section 24(2) (iii) of that Act.      The assessee  is a  company carrying on the business of manufacturing jute goods. The case relates to the assessment year 1960-61,  for which  the relevant  accounting period is the financial year ending Match 31, 1960.      While making  the assessment  for the  assessment  year 1959-60, the  Income Tax  officer  set  off  the  unabsorbed business loss  of Rs.  1,58,845 for 1949-50 and Rs. 5,70,952 for 1950-51  against the  business income  of that  year and directed that  Rs. 15,50,189 representing the loss remaining unabsorbed should  be carried  forward.  In  the  assessment proceeding for  the assessment  year 1960-61,  with which we are concerned, the assessee claimed that the unabsorbed loss should be  carried forward  and set off against the business income of  the current year. The Income Tax officer rejected the claim  on the ground that the unabsorbed loss related to 1950-51 and could not be carried forward for more than eight years. The  assessee pressed  the claim in appeal before the Appellate Assistant  Commissioner but   without  success.  A second appeal  was dismissed  by the  Income  Tax  Appellate Tribunal. At the instance of the assessee, the Appellate 908

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Tribunal referred  the following question of law to the High Court at Calcutta:-           "Whether, on  the facts  and circumstances  of the      case, the  assessee was  entitled in  law  to  set  off      unabsorbed loss of Rs. 15,50,189 of the assessment year      1950-51 against  the business  income of the assessment      year 1960-61 ?" The High Court answered the question in the negative.      In this  appeal by the assessee it is contended that by virtue of  section 24(2) (iii) of the Indian Income Tax Act, 1922, as  it stood  before its  amendment with  effect  from April 1,  1957, the  assessee had acquired a vested right to have the  unabsorbed loss  carried forward from year to year until it was completely set off and the subsequent amendment limiting the  period for  carrying forward the loss to eight years could  not divest  the assessee  of the  vested  right which had  thus accrued  to him.  It is pointed out that the amendment  effected   in  1957   is  not   retrospective  in operation. In  our judgment,  there is  no substance  in the assesse’s claim.      Section 24(2) has suffered amendment a number of times. Prior to its amendment by the Finance Act, 1955 it permitted a business  loss to be carried forward for not more than six years, except  in the  case of  losses pertaining to certain assessment years  ending with  the assessment  year  1943-44 where the  period for  carrying forward was shorter. Section 16 of  the Finance Act, 1955 amended section 24(2), and as a result of  the amendment section 24(2) (iii) provided that a businesss loss which was not wholly set off could be carried forward from  year to  year. Thereafter, Finance (No. 2) Act of 1957 amended s.24(2) (iii) with effect from April 1, 1957 and in  consequence an  unabsorbed loss  could  not  now  be carried forward for more than eight years.      The assessee  claims a vested right under section 24(2) (iii), as  it, stood  before its  amendment in 1957, to have the unabsorbed  loss of 1950-51 carried forward from year to year until  the loss  is completely  absorbed. The  claim is based on a misconception of the fundamental basis underlying every income  tax assessment. "It is a cardinal principle of the tax  law that  the law to be applied is that in force in the assessment  year unless  otherwise provided expressly or by necessary  implication." Commissioner  of Income-Tax West Bengal v.  Isthmian Steamship  Lines  and  Karimtharuvi  Tea Estate Ltd.  v. State  of Kerala  on that  principle, it  is abundantly clear that when an 909 assessment for the assessment year 1960-61 is to be made and section 24(2)  is invoked, it is s.24(2) as in force in that assessment year  which has  to  be  applied.’  That  is  the provision as amended by the Finance (No. 2) Act, 1957. There is no  question of  the assessee possessing any vested right under  the  law  as  it  stood  before  the  amendment.  The assessment for one assessment year cannot, in the absence of a contrary  provision, be  affected by  the law  in force in another assessment  year. A  right claimed  by  an  assessee under the  law in  force in  a particular assessment year is ordinarily  available  only  in  relation  to  a  proceeding pertaining  to   that  year.   Therefore,  inasmuch  as  the provisions of  section 24(2), as amended in 1957, govern the assessment for  the assessment  year 1960-61, the High Court is right  in affirming  that  the  unabsorbed  loss  of  Rs. 15,50,189 of  the assessment  year 1950-Sl cannot be carried forward for  more than  eight years, and consequently cannot be set  off against  the business  income of  the assessment year 1960-61.

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    It  is   pointed  out   that  the  Appellate  Assistant Commissioner mentioned  in his order for the assessment year 1959-60 that  the unabsorbed loss of Rs. 15,50,189 should be carried forward.  That direction has meaning only if the law in  force   in  the  assessment  year  1960-61  permits  the unabsorbed loss to be carried forward into the assessment of that  year.   The  direction   by  the  Appellate  Assistant Commissioner assumes  that it the law permits the unabsorbed loss to be carried forward into future years, but as we have seen that  is not  the law  and, therefore, the assessee can derive no advantage from that direction.      The assessee  relies on  the judgment  of this Court in Commissioner of Income Tax Kerala v. Helen Rubber Industries Ltd.(l) That  was a  case, however, where paragraph 3 of the Taxation Laws (Removal of Difficulties) order, 1950 operated to divide  the previous  years to which the provision of the Travancore Income  Tax Act, 1946 applied from those previous years to  which the provisions of the Indian Income Tax Act, 1922, brought into force in the State of Travancore in 1950, would apply.  It was  because of the Removal of Difficulties order that  the Court  held that  since under the Travancore Law the loss could be carried forward for two years only and those two  years ended be- fore the previous years for which the Indian Income Tax Act began to apply, the benefit of the period of  six years  under the  Indian Income Tax Act would not be available. The case is clearly distinguishable.      In the result, the appeal fails and is dismissed. P.B.R.                                     Appeal dismissed. 910