Holding

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.

Summary

Reliance Jute & Industries Ltd. claimed that an unabsorbed business loss of Rs 15,50,189 from the assessment year 1950‑51 could be carried forward and set off against its business income for the assessment year 1960‑61. The Income‑Tax Officer rejected the claim, citing the 1957 amendment to section 24(2)(iii) of the Indian Income‑Tax Act, 1922, which limited the carry‑forward period to eight years. The assessee argued that, under the pre‑amendment provision, it had acquired a vested right to carry the loss indefinitely, and that the amendment could not divest that right. The Supreme Court held that the law applicable to an assessment is the law in force for that assessment year, and the 1957 amendment was not retrospective; consequently, the loss could not be carried forward beyond eight years and no vested right existed. The appeal was dismissed.

Issues considered

Whether the assessee had a vested right to carry forward the unabsorbed loss of AY 1950‑51 beyond eight years under the pre‑1957 version of s.24(2)(iii).
Whether the 1957 amendment to s.24(2)(iii) is retrospective and applicable to the assessment year 1960‑61.
Which law—pre‑amendment or amended—governs the assessment for the year 1960‑61.

Legislation cited

Income Tax Act, 1922s. 24(2)(iii)

Subjects

income taxcarry forward lossvested rightsection 24(2)assessment yearretrospective amendmenttax law principle

Judgment

906

A 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 l'
c 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
D 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 before the Appellate Assistant Com-
missioner 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 co1npletely set off and that the subsequent amendment limiting the period
F toieight years coUld not divest the as.sessee 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
Q 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 year unless otherwise provided expre.ssly -or
by necessary implication. A right claimed by an asses..c;ee· under the law in force
In a particular assessment year is ordinarily available only in relation to a pro-
ceeding pertaining to that years. [908 G, 909 BJ
H Commission~r of Income-Tax, West Bengal v. lstJimlan Steamship Lines,
(1951) 20 I.T.R. 572 and Karimtharuvi Tea Estate Ltd. v. State of Kerala (1965)··
60 I.T.R. 262: referred to.
RELIANCE INDUSTRIES v. C.!.T. (Pathak, J.) 907

(b) When an assessment for the assessment year 1960-61 was to be made A
and s. 24(2) \Vas invoked it was the section in force as in that assessment year
which bad 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 directiorr oi the Appellate ·Assistant Commissioner that the unabsorbed
loss should be carried forward have meaning only if tbe law in force in the
relevant as~.essment year permits the unabsorbed loss to be carried forward into B
the assess1nent of that year. In the instant case the Appellate Assistant Com-
missioner assumed that the law permitted the unabsorbed loss to be carried for-
ward into fulurc years. But that was not the law in the relevant assessment
year and therefore ~ assessee could derive no advantage from that direc-
tion. [909 D-E]
Comn1f:;sioner of Income Tax, Kera!a v. Helen Rubber Industries Ltd., (1962)
44 J.T.R. "• 14. distinguished.
c
• 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. Desai, S. R. Agarwal, Anil Sachthey, Praveen Kumar and D _
Miss Bl~a Gupta for the Appellant.
T. A. Ramachandran and Miss A. Subhashini for the Respondent.
The Judgment of the Coort 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
E
interpretation of section 24(2) (iii) of that Act.
The assessee is a company carrying on the business of manufac-
turing jute good!;. The case relates to the assessment year 1960-61,
for which the relevant accounting period is the financial year ending
March 31, 1960.
F
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 represent-
. ing the kiss remaining unabsorbed should he carried forward. In the
asse"ment proceeding for the assessment year 1960-61, with which G
we are concerned, the assessee claimed that the urny,sorbed loss should
be carried forward and set off against the business income of the
current y<~ar. 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 Co=issioner but H
without success. A second appeal· was dismissed by the Income Tax
Appelhte Tribunal. At the instance of the assessee, the Appellate
908 SUPREME COURT REPORTS [1980] 1 S.C.R.

A Tribunal referred the following question of law to the· Higb Court at
Calcutta:-
"Whether, on the facts and circumstances of the case,
the :u.sessee was entitled in law to set off unabsorbed loss of
Rs. 15,50,189 of the assessment year 1950-51 against the
buc,iness income of the assessment year 1960-61 ?"
B
The Higb 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
C acquired a vested right to have the unabsorbed loss carried forward
from year to year until it was completely set off and th" subsequent
amendment limiting the period for carrying forward the loss to eight
years coiI1d not divest the assessee of the vested right which had thus
accrued to him. It is poirrb"d out that the amendment effected in
1957 is not retrospective in operation. In our judgment, there is no
D substance in the assessee'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
E asse.ssment 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
J!' unabsorbed loss could not now be carried forward for more than
eigbt 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
G absorbed. The claim is based on a misconception of the fundamental
basis underlying every income tax assessment. "It is a cardinal prin-
ciple of the tax law that the law to be applied is that in force in the
assessment year u'nless otherwise provided expressly or by necessary
implication." Commissioner of lncome-l'ax, West Bengal v. Isthmian
Steamship Lines(') and Karimtharuvi Tea Estate Ltd. v. State of
H Kera/a('). 'On that principle, it is abundantly clear that when an
(1) (1951) 20 I.T.R. 572.
(2) (1966) 60 I.T.R. 262.
RELIANCE INDUSTRIES v. C.l.T. (Pathak, J.) 909

. ;(
'
assessment for the assesseent year 1960-61 is to be made and section
24(2) is 'invoked, it is s.24(2) as ill 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 pos-
sessing any vested right under the law as it stood before the amend-
ment. TI1e assessment for one assessment year cannQt, in the abrenee
B
of a colltrary provision, be affected by the law in force in another
assessment ~ar. 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
provisio:n of section 24(2), as amended in 1957, govern the assess-
ment for the assessment year 1960-61, the High Court is rigJ:it in affirm- c
' ing that the unabsorbed loss of Rs. 15,50,189 of the assessment year
1950-51 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.
It is pointed out that the Appellate Assistant Commissioner mch-
tioned in his order for the assessment year 1959-60 that the unabsorbed D
loss of Rs. 15,50,189 should be carried forward. That direction has
meanilig .cnly if the law in foree in the a55essment year 1960-61 pe1-
mits th~' unabsorbed loss to be carried forward into the assessment of
that year. The direction by the Appellate Assistant Commissioner
assumes that the law permits the nnabsorbed Joos to be carried for-
E
• ward 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.(') That was
a case,, however, where paragraph 3 of the Taxation Laws (Removal
of Difficulties) Order, 1950 operated to divide the previous years to F
which the provisions of the Travallcore Income Tax Act, 1946 applied
from those previous years to which the provisions of the Indian Income
Tax Act, 1922, brought into foree 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- G
fore the ~evious years for which the Indian ~come Tax Act began
'l' 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 app~al fails and is dismissed.
H
P.B.R. Appeal dismissed.
(!) (1952) 44 LT.R. 714.