# P. V. Rathava Rttldi v. The appeals fail, an<l 11.re dismissed with costs

- **Citation:** [1962] Supp. 2 S.C.R. 605
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Case number:** Civil Appeal No. 466 of 1960
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/p-v-rathava-rttldi-v-the-appeals-fail-an-l-11-re-dismissed-with-costs-2328
- **Pages:** 8

## Headnote

2 s.c.R.
SUPREME COURT REPORTS
605
J9t2
in a Bank to the account of the Company. Thus,
the amount mnst he held, on the terms of the
aO'reement, to have been received by the Japanese
C;mpany, and this attrncts the application
of
s.(4)(l)(a).
Indeed, the Japanese Company did
<li;poses of a part of those arnrmnts by instructing
the assessee firm that they be applied in a particular
way. Jn our opinion, the High Court was right in
answering the question against the assessee.
P. V. Rathava Rttldi
v.
The appeals fail, an<l 11.re dismissed with costs,
one hearing foe.
Appeal dismi88ed.
COMMTSSIO';ER OF INCOME.TAX KER.ALA
v.
'TELEN RUBBER INDUSTRIES LTD .
. srxHA, c .. r., J. L. KAruR, M. HmAvATULLAH,
.J.C. SHAH and J. R. MunHOLKAR, JJ.)
Incon1e Tax-Lo.<J~ incurred in Travancore Stat£ in 1946-
·if!JJlication of India la•o,9 to tl1f' /.._'Jtate-Asse-9.r;ee, if entitled to
rarry Joru·ard the fnss to six ~1ears once the rigf,,t lapsed under
1';fafe lau)~~-'l'ravanrore l11cnrne-tax .. Act, I 121 M.FJ. (Travancore
XX!lf of 1121 M. fi:.) .<. 32-India1' lnrome-tax Act, 1922
(11 of 1922), s. 21-ludinn Finance Art, J.?50 (2•j of 1950),
•· 12-Taxntion lntr-< (Part B St,.le-<) (RemomI nf D(fjicultie")
Ord<>r, 1950, para 3.
The respondent company was incorporated in the former
State of Travancore.
The dispute was ahout the right of
the respondent assessee company to c3rry for\vard the loss of
the years 1946 under the provisions of the Travancore Act
read with s. 24 (2) of the Indian Income-tax Act and the
Taxation laws (Part B States)(Rcmoval of Difficulties) Order,
19:10, to the assessment year 1951-52 in the assessme"nt of the
company for its year of account. The Income-tax Officer
held that the loss of the year 1946 could not be carried for-
\vard to that year, since it had lapsed after two years under
s. 32 of the Travancore Act ands. 24 (2) was not applicable,
in dew 6f para 3 of the order.
Held, that the Taxation laws (Part B State) (Removal
of Difficulties) Order, 1950, passed under s. 12 of the Indian
Commissioner of
lruome-tax
Hid ryatuilah J.
1962
J anum:Y Ili.
]If~
c.-t•siowr oJ
lftell,.,. Tax Kerala
v.
H•U. Rutba
J"""'1riu w.
Hid•,10tu/lo/I J,
606 SUPREME COURT REPORTS [1962] SUPP.
F'mance Act, 1950, was not intended to make a dividing line
bc~ccn those pnovious ycan to which the provisions of the
earlier law would apply, and those ptcvious years to which the
providons of the Income-tax Act would apply. The rights
were neither enlarged or curtailed by para 3 of the order.
That paragraph said that the right was available in the aame
'lnanner, to the same extent and upto the same year of assessment as laid down in the State law. The law to apply was
thu• the State law and the carry forward could only be for
two years.
Indore Malwa United Mills Ltd. v. Commiaaioner of
Income-tax, (1959) 35 I. T. R. 271, approved.
Cxv1i, APPELLATE JURISDICTION: Civil Appeal
No. 466 of 1960.
Appeal from the judgment and order da~d
October 31, 1958 of the Kera.la. High Court in
I. T. R. No. 2 of 1956 (K).
K. N. Rajag<rpal Sastri and P. D. Menon, for
appellant. The respondent did not appear.
1962. January 16.-The Judgment of the Court
was delivered by
HrnAYATULLAII, J.-The Commissioner
of
Inoome Tax, Kerala and Coimbatore, ha9 filed thi8
appeal against the judgment and order of the High
Co111't of Kera.la dated October 31, 1958, by which
th11 High Court answered in favour of the respon·
dent (Helen Rubber Industrie1, Ltd., Kottayam) t.he
following question :
"Whether under the prov is ions of the
Indian Inoome·tax Aot the petitioner is entitled
to carry forward the loBB for a period of six
years notwithstanding the faot that during the
period when the 1088 had occurred, the law
applicable w&& the Travancore Income-tRx
Act ?"
•
The High Court h&& granted a certificate under
\I
e. 66A(2) of the Income-tax Act. Two questions
were referred to tho High Court in compliance with
an earlier order of the High Court under s. 66(2) ;
•
1
2 s.c.R. . SUPREME COURT REPORT

## Text

2 s.c.R.
SUPREME COURT REPORTS
605
J9t2
in a Bank to the account of the Company. Thus,
the amount mnst he held, on the terms of the
aO'reement, to have been received by the Japanese
C;mpany, and this attrncts the application
of
s.(4)(l)(a).
Indeed, the Japanese Company did
<li;poses of a part of those arnrmnts by instructing
the assessee firm that they be applied in a particular
way. Jn our opinion, the High Court was right in
answering the question against the assessee.
P. V. Rathava Rttldi
v.
The appeals fail, an<l 11.re dismissed with costs,
one hearing foe.
Appeal dismi88ed.
COMMTSSIO';ER OF INCOME.TAX KER.ALA
v.
'TELEN RUBBER INDUSTRIES LTD .
. srxHA, c .. r., J. L. KAruR, M. HmAvATULLAH,
.J.C. SHAH and J. R. MunHOLKAR, JJ.)
Incon1e Tax-Lo.<J~ incurred in Travancore Stat£ in 1946-
·if!JJlication of India la•o,9 to tl1f' /.._'Jtate-Asse-9.r;ee, if entitled to
rarry Joru·ard the fnss to six ~1ears once the rigf,,t lapsed under
1';fafe lau)~~-'l'ravanrore l11cnrne-tax .. Act, I 121 M.FJ. (Travancore
XX!lf of 1121 M. fi:.) .<. 32-India1' lnrome-tax Act, 1922
(11 of 1922), s. 21-ludinn Finance Art, J.?50 (2•j of 1950),
•· 12-Taxntion lntr-< (Part B St,.le-<) (RemomI nf D(fjicultie")
Ord<>r, 1950, para 3.
The respondent company was incorporated in the former
State of Travancore.
The dispute was ahout the right of
the respondent assessee company to c3rry for\vard the loss of
the years 1946 under the provisions of the Travancore Act
read with s. 24 (2) of the Indian Income-tax Act and the
Taxation laws (Part B States)(Rcmoval of Difficulties) Order,
19:10, to the assessment year 1951-52 in the assessme"nt of the
company for its year of account. The Income-tax Officer
held that the loss of the year 1946 could not be carried for-
\vard to that year, since it had lapsed after two years under
s. 32 of the Travancore Act ands. 24 (2) was not applicable,
in dew 6f para 3 of the order.
Held, that the Taxation laws (Part B State) (Removal
of Difficulties) Order, 1950, passed under s. 12 of the Indian
Commissioner of
lruome-tax
Hid ryatuilah J.
1962
J anum:Y Ili.
]If~
c.-t•siowr oJ
lftell,.,. Tax Kerala
v.
H•U. Rutba
J"""'1riu w.
Hid•,10tu/lo/I J,
606 SUPREME COURT REPORTS [1962] SUPP.
F'mance Act, 1950, was not intended to make a dividing line
bc~ccn those pnovious ycan to which the provisions of the
earlier law would apply, and those ptcvious years to which the
providons of the Income-tax Act would apply. The rights
were neither enlarged or curtailed by para 3 of the order.
That paragraph said that the right was available in the aame
'lnanner, to the same extent and upto the same year of assessment as laid down in the State law. The law to apply was
thu• the State law and the carry forward could only be for
two years.
Indore Malwa United Mills Ltd. v. Commiaaioner of
Income-tax, (1959) 35 I. T. R. 271, approved.
Cxv1i, APPELLATE JURISDICTION: Civil Appeal
No. 466 of 1960.
Appeal from the judgment and order da~d
October 31, 1958 of the Kera.la. High Court in
I. T. R. No. 2 of 1956 (K).
K. N. Rajag<rpal Sastri and P. D. Menon, for
appellant. The respondent did not appear.
1962. January 16.-The Judgment of the Court
was delivered by
HrnAYATULLAII, J.-The Commissioner
of
Inoome Tax, Kerala and Coimbatore, ha9 filed thi8
appeal against the judgment and order of the High
Co111't of Kera.la dated October 31, 1958, by which
th11 High Court answered in favour of the respon·
dent (Helen Rubber Industrie1, Ltd., Kottayam) t.he
following question :
"Whether under the prov is ions of the
Indian Inoome·tax Aot the petitioner is entitled
to carry forward the loBB for a period of six
years notwithstanding the faot that during the
period when the 1088 had occurred, the law
applicable w&& the Travancore Income-tRx
Act ?"
•
The High Court h&& granted a certificate under
\I
e. 66A(2) of the Income-tax Act. Two questions
were referred to tho High Court in compliance with
an earlier order of the High Court under s. 66(2) ;
•
1
2 s.c.R. . SUPREME COURT REPORTS
607
but with the other question, we are not concerned
in this appeal.
Messrs. Helen Rubber Industries,. Ltd. is a
Company, which was incorporated in the former
State of Travancore with its registered office at
Kottayam. In the year 1941, the assessee Company
granted a lease of the fao1 ory to certain persons for
a period of 15 years. . From that year, the rent and
royalty received from the lelisees were the only
souroo of income. Disputes having .arisen, the
lessees suspended payment Crom June 1946, Litigation followed ; but the dispute was· settled by
the assessee Company reOf'iving Rs. 23,000/- odd in
full satisfaction. With the details of these disputes
and their settlement, we are not concerned. The
year of account of the assessee Company is the
Calendar year. Before the extension of the Indian
Income-tax Act, there was in force in Travancore
State, thfl Travancore Income-tax Act, 1121 M. E.
(Act XXIII of I 121 M. E.), which came into force
on the first day of Ghingom 1122, M. E. (Augu,st 17,
1946). The assessment vear um1er t.he'\rravl\ncore Act
.
'
end('d on the le.st day of Karkadalcom, which corresponds to August 16, 1947. Thus for the account
year, 1-1-1946 to 31-12-1946 of the firm the assessment year was 1123 M. E. (17-8-1947 to 16-8-1948).
The asseasee Company deC!ared losses in the
account years, 1946, I 9!7 and 1948. These losses,
together with the dates of the account years and the
assessment years are tabulated below :-
Year of account
Year of assessment.
Loss
l946(i~IW6~-1123}i~l7-~~47~s.~031-10-0
31-12-1946)
to 16·8-1948)
l947(1-l-l947to llUM.E.(17-8-19±8 Rs.!6606.1- ()
31-12-1947)
to 16-8-1949)
. · '
1948 (1-1·1948to Jl25ltf.E. (17-8-1949 Rs. 2604-13-9
31-12-1948)
to 16-8-1950)
------
Total Rs. 13241-9-3
196Z
Commissioner o_f
lnconu·'l'aJC Kerala
v.
Helen Rublnr
Industriea Ltd.
HiJv'Jiull11h I.
Jg/;2
Co,,,,,.U1ion1r •f
1"""'11t·lax !\train
•.
Htltn Ruhbr.•
lnrl11.1'1it' Lid.
HiJa.ralullah J.
608 SUPREME COPRT REPORTS (1962] SUPP.
The dispute in this case is about the right of
the a!l.,essee Companv to rarry forward ihP loss of
the y .. ar
19~6 under the
prcrvisions
of
the
Trava11eorc Act read with s. 2-l(2) of the Indian
Incom•··tax Act and th<' Taxation Laws (Part B
States) (Hemoval of Difficulties) Ord(•r, 1950 to the
assessment. year, 19.il-52, in the ass"ssmnnt of the
Compnnv for its year o( aecount, the C1tlendar Year,
J!l:iO.
ThP Incomr.tax Offic{:r hrld that the loss of
the vear ]f)~6 ooulcl not bP carried forward to that
ye~;, sinct> it had lapsed after two years under s. 32
of the Travancore Art, and R. :?-~(:?) was not applicable, in view of paragraph 3 of the Orcler, mentioned above. The onkr of the Incomt1-tax Officer wa~
ronfirm,,d in appeal hy the A ppPllato AHsistant
Commi•sioner and the Appellate Trihnnal.
Tht'
Trih•mal was mov••d for a case, but declirn•rl to
state one; but tlrn Hig;h Court c1Lllnd for a statement of the ca•o umle.r s. lifl(2) :mrl the ahovcmentionccl question w:is dMiried in favour of the
aseeoSC<' Company.
The only qn .. stinn argurd in
this appeal is wheth1•r the High Court was right in
the answer it gii.vc.
Tho asscsseo Company W<L8 not
rcpresc'lted at the hearing before this Court.
The Indian Income-tax Act w11s extended to
Trav&ncorc-Cochin hy s. 3 of the Indian Finance
Act, lflpO.
By s. 13(1) of the same Act, it wa8
prnvidrt} :
"If immediately before the 1st 1lay (If
A pri)j I!l50, there is
i~ form; in any part B
Statd: ..... an.v law rl'ljting to mcom•'-tnx ..... .
that law shall' cease/to havt> efTcc~ except for
the
pnrpo~os of t)ie levy, ass"ssmont and
collection of income.t:ix ...... in r<'s1wct of any
p<'riod not included in tho prcviouH year for
the purposcs of a.ssessmPnt un<lf'r the Indian
Income.tax Act, J!):!:! (Xf ,,f Ifl!:!), for the
year ending on tho 31st day of ~fareh, l fl:il,
f
' .
t
,,
or or nny suJsrq11('n )'<'Ill ..... .
..
'
•
I
..
•
r
28.C.R.
. SUPREME COURT REPORTS
609
By this section a clear division was made between
the operation of the prior law and the Indian Incometax Act. The a•sessment for the year, 1951-52, was
thus mij,de on the assesiee Company under the
Indian Income-tax
Act.
Under s. 24(2) of the
Indian Income-tax Act, as it existed prior to its
amendment by the Finance Act, 1955, it was
provided:
"Where any assesse& sustains a loss of
profits or gains in any year, being a previous
year not ear lier than the previous year for
the assessment for the year ending on the
31st day of March l\140, under the head
'Profits ana gains of business, profession or
vocation1 and the loss cannot be wholly set
off under sub-section(!), the portion not so set
off shall be carried forward to the following
year, and so on, but no loss sha 11 be ~o carried
forward for more than six years, and a loss
arising in the previous ye~rs fur the assessment. for "I he year• ending on th~ 31st day C>f
March, 1040, the 31st day of March, 1941, the
31st day of J\firch, 19+2, the 31st day of
March. l!l43, and the 31st dav of March. 1944
respectively shall be carried ·forward only for
one, two,
three,
four
and
five
years
respectively."
Since we are concerned with the loss for the year,
which does not correspond· to the years named in
the latter part of the section above-quoted, that
part of the section does not apply to the assessee
Company'.s case. What was thus claimed was the
benefit of· the earlier part., where the loss was
allowed to be carried forward for six years.
This position taken by the assessee Company
can hardly be considered in view of the provisions
of s. 32 of the Travancore Act, read with the
Removal of Difficulties Order passed in 1950.
Section 32 uf the Tm van core Act was a reproduction of the Indians. 24(2) except for a change of the
1962
Commis.dont• •f
lncome·tax Ke,a·a
v.
Hellen Rubbtr
Industries Ltd.
Hida;•atu/lali J.
IHI
C-..W-o,f
t_.ia lfrr"'4
••
H.i- ll""brr
1"""11"1 LU.
HllqolWlu J.
610 SUPREME COURT REPORTS [19f2) SUPI
dates mentioned therein, due obviouslv to the fact
that the Travanoc>ro Act came into
0forcl' 0n the
firstda.y of Chingam, 1122 M.E. (August, Ii, 1946).
It is enough to point out that instead of "31st
March", whe1·evcr th"Y occurrecl, the wnrcls "the
la~t day of Kv.rkoo.alrom" (August, 161 were substituted, and instead of the yrars, HJ.to, 1941, 1942,
1943 and l!J44, were substituted th1> llfalnvalnm
years, 1122(17·8-1946to16-8-1947), 1123 (17-S-1947
to 16-8-1948), II24 (17-8-1948 to 16-8-1949), 1125
(17-8-1949 to 16-8-1950), and 1126 (17-8-1950 to
16-8-1951).
These
were
the
only
diff'erenres
betv.een the two eectionP, 81"d P. 24(2) of the frdi8n
Income-tax Act, so modified, can be read as s. 32
of the Trava.noore Act.
The existance of these two sections in the two
Acts was likely to lead to somP clifficulty, and a
question was likely to arise whhh law w11s to
prevail. Section 12 of the Indian Fin11nN> Act.
I 95\J, therefore, enabled the Central GovPmmPnt. to
pasa a.n Order removiniz any sueh diffimlty. The
T~xation Laws (Part B States) (Removal of Difficulties) Order, rneo was thus passrd. Paragraph 3
of that order provided :
"3. Carry· forward and set off of previous loascs.-wherc in any previous year
prior to tho previous year for "the as~es~ment
for the yea.r ending on the 31st d11y of March
19;;0, an assessee bas sustainecl a loss CJf profits
or gains in any business, profession or V()('ation carried on by him. and surh lc:ss would,
bad tho State law continued to hi' in force,
have brt'n set off against the profits and gainP,
if any, from the same
business chargeable
tu tax in the said yea.r of aasespment or in any
yca.r subaequent thereto, such loF.s wcu !cl be
bO set off in the same manner, to the same
extent, and up to the same year of assesPment
tu1 it would have been set off hud the State
law continued to be in foroe."
'·
'
2 S.C.R.
SUPREME COURT REPORTS 611
The critical words are those contained in the
1982
later part. namely, "in the same manner, to the same
Commis<ioner ef
extent, and up to the same year of assessment, as it
Income-tax Kirola
would have bcrn set off bad the State law continuH,/en !lubber
ed to be in force".
They show that the law to
Industries Ltd.
apply to the loss of "any previous year prior to the
Hida_,atullah J,
previous year for the assessment for the year ending
on the 31st day of March,
1950" was the law in
force in a Part B State here, the Travancore Act.
Now, taking the case of the assessee Company, we
shall indicate which previous year or years would
be governed by the Travancore Act. The previous
year of the assessee Qompany for the assessment
year ending 3ls't day of March, 1950 would be the
Ca!er.dar year, 1-1-1949 to 31-12-1949. To that,
the Indian Incom.,·tax Act would apply. The
application of the Travancore Act by para 3 of the
order was limited to the previous year before
1-1-1949 and other earlier previous years. The
prev'ioue year, with which we are concerned,
1-\-19!6 to
31-12-1946, is so clearly a
previous year, to whi~h the Travancore Act applies.
that it does not admit of any doubt or difference.
The matter is thus governed by the Travancore
Act.
.
The Travnncore Act laid down, inter aUa, that
a loss arising in the previous year . for the assessment for the year ending on the laPt day of Karkadak1YJn, 1123, could be <'arried forward for two
years. The assessment year for 1123, M.E. covered
the period, 17-8-1947 to 16-8-1948, and the previous
year of the assessee Company relative to that
assessment year was 1-1-1916 to 31-12-1946. The
loss of the Calendar year, 1946 could be carried
forward to the Calendar yea.rs, 1947 and 1948 and
given effect to, till the assessment year, 1125
(17-8-1949 to 16·8-1950). The assessment year,
1-4-1951 to 31-3-1952, c'.lrresponded to the account
year of the assessee Company, l-l-1950to 31-12-1950,
and that is beyond two years, whether on~ takes
IHI
c-..;.,,. •f
1-Kn.Ja
...
HM R"66n
1 ... trialld.
Hr4.pt"'/all J.
612
SUPRElIE OOURT REPORTS [IH•2] SUPP.
the account year or the assessment y<iar as th·· hRBis
of tho calculation of two years.
The High Court, with all due respt·ct. waA not.
right in thinking thllt the Rem•wal of Diffil'ultii>s
Order, 1950 was meant to enlarge the right• 0f t.l e
new assessees
lirought within the rearh of the
Indian Income-t.Bx law.
The intention of the law
was to make a dividing linJJ between thoRe prrvintrn
years to which tho provisions of tho rarlier law
would
apply,
and
those
nrevious
years
to which
the
prov1s1onA
of
the
Indian
Income-tax Act woulrl apply. Tho rights were
noith<>r <>nlarged nor curtailed. As pointe<l out by
Chagla, C. J. in the lndort Afal1m United Mills,
Ltd. v. Cammiasioner of l'TIAXJ'TM fax (1 '.
"tho onlv right integrntion hns gin-n to
an assP~ReP is t hP. right rontn int>d in chmsrs
(sir) 3 of the I Removal nf Difficulties) Onln,
1950. and that right is that if th" law of J\is
own State permitti>d him to carry forward th<'
los.qes, then that right is preee1 ..-cd under the
Indian Income-tax Aet."
paragraph 3 of the Order clearly said that the right
was available in the same manner, to thi> •amc extent and up to tho year of aesessm 0 nt., aA laid 1lown
in the State law (hert>, the Trav1mcnre Act).
i'iincP,
in this case, the carrv·forward of the loss was for
only two years, and· those years wern he fore the
previous yflar from whirh the Inrlia.n Income-tax
Act began to apply, thrre is no question of 1h••
application of the Indian Income-tax Act.
The appeal thus sneccetl8, a.wi is allow<•<!. 'fhe
a.ssessee Company shall pay the costs of the appt>al
in the Hi1rh Court, bot there shall be no ordnr auout
costa in this Court.
A ppe.al allowed.
(I) [1959)'51 T. R. 271.