JUDGMENT
1. The Income-tax Appellate Tribunal, 'B' Bench, Allahabad, has in compliance with the direction issued by this court under Section 256(2) of the Income-tax Act, 1961, referred the following question for our opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the speculative losses of assessment years 1959-60, 1960-61 and 1961-62 could be carried forward and adjusted against the speculation profits of the assessee-firm for the assessment year 1964-65?"
2. The assessee is a registered firm. In its assessment years 1959-60 to 1963-64, losses from speculative business were determined aggregating to Rs. 37,199 as under :
1959-60 Rs.
6,499 1960-61 Rs.
14,057 1961-62 Rs.
8,663 1962-63 Rs.
6,942 1963-64 Rs.
Total Rs.
37,199
3. In the assessment year for 1964-65, the firm claimed that the above speculation losses which had not been allowed to be set off against the income of the regular business for the relevant years should be set off against speculation profits of that year. The Income-tax Officer did not allow the claim. On appeal, the Appellate Assistant Commissioner allowed the claim and directed the Income-tax Officer to allow the set-off of the speculation losses of earlier years against speculation profits of 1964-65 and to carry forward the balance of losses to be set off similarly in subsequent years. The department filed an appeal against this order before the Tribunal. The Tribunal upheld the order of the Appellate Assistant Commissioner and now the Commissioner has come up to this court.
4. Counsel for the department has contended that inasmuch as the claim for set-off was being made in the assessment year 1964-65, i.e., after the Income-tax Act, 1961, had come into force, the set-off could only be allowed in accordance with the provisions of Section 75 of the Act. It has been contended that under Section 75 of the Act, the losses have to be apportioned between the partners and they alone are entitled to have the amount of loss set off and carried forward under Section 73 of the Income-tax Act, 1961. It will be noticed that the periods 1959-60, 1960-61 and 1961-62 relate to a period anterior to the enforcement of the 1961 Act. The periods 1962-63 and 19-63-64, relate to a period of time when the 1961 Act was enforced. In order to appreciate the contentions raised in this reference, it will be useful to set out Sections 73 and 75 of the 1961 Act as also Sections 24(1) and 24(2) of the 1922 Act:
"73. (1) Any loss, computed in respect of a speculation business carried on by the assessee, shall not be set off except against profits and gains, if any, of another speculation business.
(2) Where for any assessment year any loss computed in respect of a speculation business has not been wholly set off under Sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee had no income from any other speculation business, shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and--
(i) it shall be set off against the profits and gains, if any, of any speculation business carried on by him assessable for that assessment year ; and
(ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on.
(3) In respect of allowance on account of depreciation or capital expenditure on scientific research, the provisions of Sub-section (2) of Section 72 shall apply in relation to speculation business as they apply in relation to any other business.
(4) No loss shall be carried forward under this section for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed."
" 75. (1) Where the assessee is a registered firm, any loss which cannot be set off against any other income of the firm shall be apportioned between the partners of the firm, and they alone shall be entitled to have the amount of the loss set off and carried forward for set off under Sections 70, 71, 72, 73 and 74.
(2) Nothing contained in Sub-section (1) of Section 72, Sub-section (2) of Section 73 or Sub-section (1) of Section 74 shall entitle any assessee, being a registered firm, to have its loss carried forward and set off under the provisions of the aforesaid sections."
"24. Set-off of loss in computing aggregate income.--(1) Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in Section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year :
Provided that in computing the profits and gains chargeable under the head ' Profits and gains of business, profession or vocation', any loss sustained in speculative transactions which are in the nature of a business shall not be taken into account except to the extent of the amount- of profits and gains, if any, in any other business consisting of speculative transactions :......
(2) Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March, 1940, in any business, profession or vocation, and the loss cannot be wholly set off under Sub-
section (1), so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year, and
(i) where the loss was sustained by him in a business consisting of speculative transactions, it shall be set off only against the profits and gains, if any, of any business in speculative transactions carried on by him in that year ;......
(iii) if the loss in either case cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following year and so on, but no loss shall be so carried forward for more than eight years :......"
5. The Tribunal, following the decision of the Supreme Court in the case of Commissioner of Income-tax v. Kantilal Nathuchand Sami [1967] 63 ITR 318, allowed the set-off of the speculation losses suffered by the firm against the speculation profits of the firm, and has allowed the firm to carry forward the losses as the loss of the firm to be adjusted against its future profits. Counsel for the department has contended that whatsoever might have been the position under the Income-tax Act, 1922, the carry forward of speculation losses of a registered firm has been specifically provided under Section 75 of the new Act (1961), and this being so, the carry forward of the speculation losses of a registered firm and its adjustment thereof can be made only in accordance with the provisions of the new Act. It has been contended that the principle laid down by the Supreme Court in the case of Commissioner of Income-tax v. Kantilal Nathuchand Sami [1967] 63 ITR 318 cannot be appropriately applied to the case, arising under the 1961 Act. Unfortunately, in this case, which is of some complexity, none has appeared on behalf of the assessee. Considering the importance of the matter, we requested Sri R.K. Gulati to assist us in this case on behalf of the assessee. Sri R.K. Gulati contended that the assessee was entitled under the Act of 1922 to carry forward the speculation loss and to set it off against its future profits in the speculation business, and that right was a substantive right, It was urged that notwithstanding the repeal of the Act, inasmuch as the assessee had not been able to set off its entire speculation losses by the time that the Income-tax Act, 1961, came into force, it was entitled to set off unadjusted losses against the speculation profits of the firm. In this context, he has drawn our attention to the provisions of Section 6(c) of the General Clauses Act and has urged that the mere repeal of the Indian Income-tax Act, 1922, did not take away the vested right of the assessee to set off the speculation losses of the firm against speculative profits of the firm in the years subsequent to the enforcement of the 1961 Act. It was also contended that the Act of 1961 did not bring about any such drastic change as would make the principle laid down by the Supreme Court in the case of Commissioner of Income-tax v. Kantilal Nathuchand Sami [1967] 63 ITR 318 inapplicable to the case of a registered firm. It is indisputable that in view of the pronouncement of the Supreme Court in the case of Commissioner of Income-tax v. Kantilal Nathuchand Sami [1967] 63 ITR 318, a registered firm could, so long as the 1922 Act was in force, carry forward speculation loss, if it could not be set off against speculation profits of the year in question. However, after the 1961 Act, specific provision by way of Section 75 of the Act has been made in respect of losses of registered firm. Section 75 has already been extracted. A bare perusal of the section establishes that the loss of a registered firm, which cannot be set off against any other income has to be apportioned between the partners of the firm, and they alone are entitled to have the amount of loss carried forward for set-off under Section 73 of the Act (we have abstained from mentioning the other sections relating to carry forward and set-off mentioned in Section 75 of the Act, as they are not relevant for the purposes of the present controversy). Section 73 specifically deals with loss in speculation business, and provides for setting off of the speculation loss in speculation business only against the profits and gains of another speculation business, and Sub-section (2) provides for carrying forward speculation losses to be set off in future against the profits of any speculation business in the future years. This being so, it will not be appropriate to apply the dictum of Kantilal Nathuchand's case [1967] 63 ITR 318 (SC) to a case arising for the assessment year 1962-63. We are fortified in the view that we take by the decision of the Kerala High Court in the case of M.O. Devassia & Co. v. Commissioner of Income-tax [1973] 90 ITR 525 and of the Gujarat High Court in the case of Commissioner of Income-tax v. Dhanji Shamji [1974] 97 ITR 173. The question that now arises is as to whether the speculation losses of the years anterior to 1962-63 could be set off against the speculation profit of the firm. In support of his contention that the right conferred under Section 24(2) of the Indian Income-tax Act, 1922, was a substantive right, counsel has referred us to the cases of All India Groundnut Syndicate Ltd. v. Commissioner of Income-tax [1954] 25 ITR 90 (Bom) and Commissioner of Income-tax v. Govindalal Dutta [1958] 33 ITR 630 (Cal), In All India Groundnut Syndicate Ltd. v. Commissioner of Income-tax [1954] 25 ITR 90 (Bom), the question was as to whether a loss which the assessee could claim under Section 24(2) could be disallowed only on the ground that it had not been notified as required under Section 24(3). Their Lordships of the Bombay High Court took the view that the right conferred by Section 24(2) of the Act was an absolutely unqualified right, and not made conditional upon a computation made by the Income-tax Officer or any notice issued by the Income-tax Officer. The decision is hardly of any help for in that case, the Indian Income-tax Act, 1922, was in force and the only question that arose for determination was as to whether the- right conferred by Section 24(2) was dependent on Section 24(3) of the Act. Here the question is as to whether the repeal of the 1922 Act extinguished the right of carrying forward of the loss which had not been set off, and further as to whether such an amount could be set off against the speculative profits of the firm or be dealt with in accordance with Section 75 of the new Act. This distinction applies to the decision of the Calcutta High Court in Commissioner of Income-tax v. Govindalal Dutta [1958] 33 ITR 630 for in that case too, no such question has arisen in the present case and as such that decision is hardly of any assistance.
6. Mr. R.K. Gulati drew our attention to two other cases on this aspect of the controversy, Helen Rubber Industries v. Commissioner of Income-tax [1959] 36 ITR 544 (Ker) and Commissioner of Income-tax v. Helen Rubber Industries Ltd. [1962] 44 ITR 714 (SC). We do not think that any useful purpose will be served by referring to Helen Rubber Industries v. Commissioner of Income-tax [1959] 36 ITR 544 (Ker), as that decision on appeal was reversed by their Lordships of the Supreme Court in Commissioner of Income-tax v. Helen Rubber Industries Ltd. [1962] 44 ITR 714. The question that came up for consideration before the Supreme Court in Commissioner of Income-tax v. Helen Rubber Industries Ltd. [1962] 44 ITR 714 was as to whether a loss which under the Travancore-Cochin State law could be carried forward only for a period of two years could, in view of the application of the Indian Income-tax Act, 1922, be carried forward for a period of six years as envisaged in the Indian Income-tax Act, 1922. Their Lordships of the Supreme Court held that in view of the Taxation Laws Removal of Difficulties Order, 1950, the loss could not be carried forward for a period of six years, as the Removal of Difficulties Order, 1950, did not enlarge the rights of new assessees brought within the purview of the Indian income-tax law. This case might have been of assistance, but inasmuch as it was decided in terms of the Removal of Difficulties Order, we cannot draw succour from this decision for resolving the controversy. Counsel then relied on Section 6(c) of the General Clauses Act in support of his contention. Section 6(c) of the General Clauses Act runs as under :
"6. Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not--
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed."
7. Now, in view of the phraseology of Section 24(2), the right of a registered firm to set off and carry forward speculation losses is a substantive right. But the question is whether the 1961 Act manifests an intention different from that set out in Section 6(c) of the Act. The Indian Income-tax Act, 1922, was repealed by Section 297(1) of the Income-tax Act, 1961. Section 297(2) of the Income-tax Act, 1961, sets out the consequences of the repeal. In a case where the repealing statute sets out the consequences of the repeal and provides for certain savings in respect of proceedings taken under the repealing Act, one has to examine as to whether, in view of the repealing provision, Section 6 of the General Clauses Act can at all be applied. The Supreme Court had occasion to consider a somewhat similar situation in the case of Indira Sohanlal v. Custodian of Evacuee Properly, Delhi, AIR 1956 SC 77. Considering the question of applicability of Section 6 in general, their Lordships of the Supreme Court observed thus (page 83):
"(10) Before proceeding to determine it, it is desirable to consider whether Section 6, General Clauses Act, can be relied on. The position as regards Section 6, General Clauses Act, in the case of repeal and re-enactment has been considered by this court in State of Punjab v. Mohar Singh, AIR 1955 SC 84, and laid down as follows at page 88 :
'Whenever there is a repeal of an enactment, the consequences laid down in Section 6 of the General Clauses Act will follow unless, as the section itself says, a different intention appears. In the case of a simple repeal there is scarcely any room for expression of a contrary opinion. But when the repeal is followed by fresh legislation on the same subject we would undoubtedly have to look to the provisions of the new Act, but only for the purpose of determining whether they indicate a different intention.
The line of enquiry would be, not whether the new Act expressly keeps alive old rights and liabilities but whether it manifests an intention to destroy them. We cannot, therefore, subscribe to the broad proposition that Section 6, General Clauses Act, is ruled out when there is repeal of an enactment followed by a fresh legislation. Section 6 would be applicable in such cases also unless the new legislation manifests an intention incompatible with or contrary to the provisions of the section. Such incompatibility would have to be ascertained from a consideration of all the relevant provisions of the new law...' In the present case, Sub-section (3) of Section 58 of Central Act 31 of 1950 purports to indicate the effect of that repeal, both in negative and in positive terms. The negative portion of it relating to "the previous operation" of the prior Ordinance appears to have been taken from Section 6(b), General Clauses Act, while the positive portion adopts a "deeming" provision quite contrary to what is contemplated under that section.
Under the General Clauses Act the position, in respect of matters covered by it, would have to be determined as if the repealing Act had not been passed while under Section 58 of Central Act 31 of 1950, the position--so far as the positive portion is concerned--has to be judged as if the "repealing Act" were in force at the earlier relevant date.
Therefore, where, as in this case, the repealing section which purports to indicate the effect of the repeal on previous matters, provides for the operation of the previous law in part and in negative terms, as also for the operation of the new law in the other part and in positive terms, the said provision may well be taken to be self-contained and indicative of the intention to exclude the application of Section 6, General Clauses Act. We are, therefore, of the opinion that the said section cannot be called in aid in this case."
8. The principle laid down by their Lordships of the Supreme Court in this case is that where the repealing provision indicates the effect of the repeal on previous matters and provides for the operation of the previous law in part, as also for the operation of the new law in the other part in positive terms, the repealing and the saving provision can be said to be self-contained and excludes the applicability of Section 6 of the General Clauses Act. In the present case, similar position obtains. Section 297(2)(a) provides for completion of assessment in accordance with the old Act where a return of income had been filed before the commencement of the 1961 Act. On the contrary, Section 297(2)(b) of the Act provides for completion of assessment in accordance with the provision of the new Act where the return is filed even in respect of years covered by the 1922 Act, after 31st March, 1962. Under Section 297(2)(a)(i) of the Act in cases covered by Section 34 of the old Act, where notice had been issued before the commencement of the new Act, proceedings have to be continued as if the new Act had not been passed. On the contrary, under Section 297(2)(d)(ii) where income chargeable to tax had escaped assessment and no proceedings under Section 34 of the Act had been taken or were pending at the commencement of the Act, notice has to be issued under Section 148 of the new Act, and the provisions of the new Act are to be applied to such proceedings. So far as imposition of penalty is concerned, Section 297(2)(f) makes provision for imposition of penalty in accordance with the old Act, where assessment had been completed before the 1st April, 1962, while Section 297(2)(g) provides for imposition of penalty in accordance with the new Act where the assessment is completed after the 1st April, 1962. Section 297(2)(h) is a deeming provision, by virtue of which any election or declaration made or option exercised by an assessee under the old Act and which was in force immediately before the commencement of the new Act is deemed to be an election or declaration made or option exercised under the new Act. As respects refunds which fall due in respect of assessment completed before the commencement of the 1961 Act, the Central Government is, by virtue of Section 297(2)(i), liable to pay interest in accordance with the provisions of the 1961 Act. Similar is the position for recovery of income-tax, super-tax, interest or penalty which have become payable under the old Act. By virtue of Section 297(2)(j), the recovery can be made in accordance with the provisions of the new Act. The deeming provision has also been applied in respect of agreement entered into, appointments made, approval given, recognition granted, direction, instruction, notification, order or rule issued under the old Act and they have been by Section 297(2)(k) of the Act treated to be under the corresponding provisions of the new Act. Section 297(2)(1) expressly does away with notifications issued under Section 60(1) or 60A of the old Act. Section 297(2)(1) saves notification under Section 61, Sub-section (1), of the old Act only to the extent that provision is not made for that matter under the new Act. Thus, Section 297(2) of the new Act contains provision for the operation of the previous law in respect of certain matters, and also provisions for operation of the new law in respect of other matters. This being so, Section 297(2) must be taken to be a self contained code in respect of the operation of the old Act and the rights which might have been created under it. Inasmuch as Section 297(2) does not save the right, if any, of a registered firm to set off its speculation losses, which has been carried forward against the speculation profit of the firm, we are unable to accept the contention that the right, if any, created by Section 24(2) of the old Act remains intact after the repeal of the 1922 Act. The decision of the Supreme Court in Brihan Maharashtra Sugar Syndicate Ltd. v. Janardan Ramchandra Kulkarni [1960] 30 Comp Cas 468 cannot be appropriately applied to the present case, as in that case the provisions of Section 6 of the General Clauses Act were made applicable, by Section 658 of the new Companies Act. We, accordingly, answer the question in the negative, in favour of the department and against the assessee. As none has appeared for the assessee, there shall be no order as to costs. Counsel's fee is assessed at Rs. 200.