JUDGMENT.
HARRIES,. C. J.-This is a reference by the Commissioner of Income-tax, Bihar & Orissa, made pursuant to an order of this Court, dated the 12th of December, 1940.
The assessee had for several years been taxed on income from business which he carried on at several places. Up to the assessment year 1937-38 the following were the sources of his income :-
(a) Commissioner agency and dealing in grocery carried out at the main shop at Naya Sarak, Cuttack.
(b) Business in grocery at the Railway yard, Cuttack.
(c) Salt business at Naya Sarak.
The assessment year in question is the year 1938-39. In September, 1936, the assessee started a card-board mill at Calcutta. The assessees previous year within the meaning of Section 2 (11) (a), Income-tax act, as it stood before the amendment in 1939, ended on Ramanavami day.
For the assessment year 1937-38 the assessee filed a return showing his income only from the three sources which I mentioned above, However, during the assessment proceedings it was discovered that this cardboard mill had been started in Calcutta, and the assessee was asked why the income from this mill was not declared in the return. The assessee stated that as the mill had been newly started and had been only running for six months no income had been ascertained during that period. The assessee gave an undertaking that he would account for any profit made during those six months in the following year. The Income-tax Officer, therefore, ignored the income from the card-board mill for the six months.
In the return filed for the assessment year 1938-39 the amount for the card-board mill for eighteen months was put in which showed a loss of Rs. 17,668, which on a proper calculation should have been Rs. 28,140. The assessee claimed to deduct this loss which was for a period of eighteen months form the profit for the year 1938-39. The Income-tax authorities were of opinion that he could not deduct a loss covering a period of eighteen months from the profits of the year in question. The Income-tax Office, further, was of opinion that the loss was not a real loss at all which could be deducted from profit.
He, therefore, disallowed the loss as shown but allowed depreciation at Rs. 4,000. The assessee appealed to the Assistant Commissioner of Income-tax who upheld the finding of the Income-tax Officer. It is to be observed that the Assistant Commissioner was so dissatisfied with the accounts of the card-board mill that he was of opinion that the Income-tax Officer could have rightly held that during the period in question that mill had made some profit. One thing, however, is clear, and that is that he was not satisfied that there was any loss in those eighteen months which could be set off as against the profit.
An application was made to the Commissioner to review the order of the Assistant Commissioner, but this he refused to do. The commissioner was then asked to state a case on the question :-
“Whether, in the assessment year 1938-39, the profit and loss account of the assessee ought to have been taken for a period of eighteen months ending with the Ramnavami year 1994 as provided by Section 2 (11) (a) of the Indian Income-tax Act, 1922, before its amendment.”
The Commissioner refused to state a case upon the question but has now done so in compliance with the order of this court.
We have considered the case as stated by the Commissioner, and in my view the question is now of pure academic interest. Had there been a loss on the profit and loss account during the eighteen months in question, the matter raised in the question propounded would be very material. However, the Assistant Commissioner found that on the profit and loss account there was no loss and that finding is expressly approved by the Commissioner. The assessee has never questioned that finding and has never asked the Commissioner or this Court to frame any question relating to it. The assessee appears to have thought throughout that there was a loss and had entirely overlooked the findings of the Income-tax authorities. We are bound in this Court by those findings, and, therefore, it must be assumed for the purposes of this case that there was no loss during the eighteen months in question. In there was no loss, then, the question propounded requires no answer at all, because it matters not whether a loss for eighteen months or twelve months be taken if there no loss for a period of eighteen months.
Dr. D. N. Mitter has asked the Court to send the case back to the Commissioner to be restated under SEction 66 (5), Indian Income-tax Act. He has asked us to call upon the Commissioner to restate the case in such a way as to answer a question as to whether various items held to be capital expenditure have been rightly held to be such by the taxing authorities. In other words, he has asked us to frame another question and call upon the Commissioner to answer the same.
In my judgment we have no such power. The jurisdiction of this Court in income-tax matters is a very limited one. The Court can call upon the Commissioner under Section 66 (3), Indian Income-tax Act, to state a case upon a particular question if the letter has refused to do so. The Commissioner has never been asked to state a case upon any question relating to this loss, and as he has not refused to do so we cannot call upon him to state such a case, Further, any application to the Commissioner or to this Court at this stage is clearly out of time. As there is no question before us relating to the question whether there was or was not a loss on the profit and loss account, this Court has no power to deal with the matter. This Court can only deal with the question which was farmed; and upon which the case has been stated. As I have said, it is wholly unnecesssary to answer the question as there has been no loss, and I can see no reason why the Court should answer what has turned out to be a purely hypothetical question of academic interest only and is of no practical interest or value to the assessee.
I would, therefore, in the circumstances, make no answer to the question framed. The assessee has failed in this application and the Commissioner of Income-tax is entitled to his costs. I would assess the hearing fee at five gold mohurs and the Commissioner will be entitled to retain the one hundred rupees in deposit with him.
MANHOR LALL, J – I agree
Reference not answered.