1. K. HOSSAIN, J.--The petitioner Helal Jute Press Ltd. has challenged order dated 25-7-67 passed by the Commissioner, Income-tax in Revision Case No, 11 of 1966-67 and the order dated 1-8-66 in order No, 77/1152 Spl. passed by the Income-tax Officer Special Circle, Dacca rejecting the application of the petitioner under section 35 of the Income-tax Act.
2. In this petition facts are not in dispute. The matter relates to the assessment year 1958-59. The petitioner-company had both Jute baling and jute trading businesses. The Income-tax Officer treated them as separate and distinct from each other. The petitioner closed its jute trading business in the next year. The Income-tax Officer determined net loss in Jute trading business at Rs, 2,49,538. In Jute baling business profits before deduction of depreciation allowance was determined at Rs, 1,95,449. After deduction of depreciation allowance amounting to Rs, 46,941 the net profit in Jute baling business were determined at Rs, 1,48,503 and setting off with net loss of Rs, 2,49,538 in the jute trading business, he carried forward a net loss of Rs, 1,01,030 in respect of jute trading business. The petitioner-company filed an appeal before the Appellate Assistant Commissioner, contending that jute trading and jute baling business should treated as one business. The contention was rejected on 26-4-65. Thereafter the petitioner filed a Second Appeal before the Income-tax Appellate Tribunal which was also dismissed on 13-9-66 for default. The petitioner filed an application under section 35 of the Act on 18-12-65 before the Income-tax Officer for rectification of original assessm ent order by setting off the profits from jute baling business before deduction of depreciation from the net loss in jute trading business and thus carrying forward the depreciation allowance for the year 1958-59 as unabsorbed depreciation and also carrying forward the resultant loss in jute trading business. The Income-tax Officer refused to accept the application. The petitioner moved the Income-tax Commissioner by a revision petition under section 33-A (2) but it was also rejected. Thereafter the petitioner has moved this High Court against the aforesaid orders.
3. Mr. Afzalul Haque has appeared on behalf of the Income-tax authorities and since facts are not in dispute he has not filed any affidavit-in-opposition.
4. Mr. Rafiqul Haque Advocate, has appeared on behalf of the petitioner. The contention of the petitioner is that there should be first setting off from the profits of jute baling business the net loss suffered in jute trading business before deduction of depreciation from the profit of jute baling business and thus carrying forward the depreciation allowable for the year 1958-59 unabsorbed depreciation and also carrying forward the resultant loss in jute trading business.
5. Mr. Afzalul Haque in reply states that there is no dispute with regard to the set-off in the same year but with regard to carrying forward of loss or depreciation, it must arise from the same business and since there has been a clear finding that the Jute Baling and Jute Trading are not the same business and this has been affirmed up to the appellate stage, the Income-tax Officer has applied the correct principle in the method of computation of income of the petitioner-assessee. He has further contended that unless the finding that jute baling and jute trading business are separate business is reversed the petitioner's contention cannot succeed and so it is not an error, if at all, which can be said to be apparent from the record and could be rectified, it would amount to either review of de novo trial to reverse of the said finding.
6. Before dealing with the contention of the petitioner the relevant provision of the Act may be cited. It is section 24(2) and proviso (b) and the material portion may be quoted :- "Where any assessee sustain a loss of profit or gain in any year, being a previous year for the assessm ent for the year ending on 31st day of March 1940, under the head 'profits and gains of business, profession or vocation', and the loss cannot be wholly set off shall be carried forward to the following year and set-off against the profits and gains, if any, of the assessee from the same business, profession or vocation for that year ; and if it 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 six years........."
7. Provided that--
(b) where depreciation allowance is under clause (b) to the proviso to clause (vi) of subsection (2) of section 10 also to be carried forward, effect shall first be given to the provision of this subsection.
8. It may be worthwhile to refer to subsection (1) of section 24:-- "Where any assessee sustains a loss of profit or gains in any year under any of the heads mentioned in section 6, he shall be entitled to have the amount of loss set off against the income, profits and gains under any other head in that year."
9. Now if the above provisions of the Income-tax Act are considered it will be found that subsection
(1) deals with the set off of loss for the year of assessment; and subsection (2) deals with the carrying forward of loss, depreciation etc. Again in subsection (1) we find the law clearly allows set- off to the assessee in the year of assessment of loss of one head under section 6 against the income, profit and gains under any other head in that year. The heads under section 6 are (1)
10. Salaries (2) Interest on securities (3) Income from property (4) Profits and gains of business, profession or vocation (5) Income from other sources (6) Capital gains. We therefore find that if an assessee has incomes from more than one head as detailed in section 6 and if he sustains loss under one head, but makes a profit under another head, he will be entitled to set off the loss from the other head in that year only. But there may be cases where the loss may be more than the profits made in that year and in such contingency the Legislature in subsection (2) has provided for a different standard and different method for carry them forward. We are in the present case concerned with loss and depreciation. In the case of carrying forward of loss or depreciation for future years for set-off the requirement is that in future years, the set-off can only be allowed from the income of the same business, profession, or vocation and in this subsection (2) the Legislature has not used the word any of the heads under section 6 as has been used in subsection (1) and the words 'same business' etc. in subsection (2) cannot be construed as 'same head' or any of the heads under section 6. Legislature has used different languages in subsections (1) and (2) to convey different meanings. So we find in subsection (1) the assessee can set off loss of one head of income under section 6 against any other head of income as contemplated in the said section 6, for that year, but for the purpose of carrying forward the loss in future years the language used is that income must arise from the same business. In the present case there is a conclusive finding that jute baling and jute trading businesses of the petitioner are separate and distinct and so Income-tax Officer was correct in allowing set-off for that year even though they were two separate business but for carrying forward, the petitioner is only entitled to set off the loss or depreciation from the income of the same business. It may be stated that the depreciation arose from the Jute Baling business and the profit was also earned from Jute Baling business and the Income-tax Officer was right in deducting from the profit the depreciation of the Jute Baling business for that year and then deducting the resultant profit from the loss of Jute Trading business for the year and carried for ward the net loss in Jute Trading business for set-off in the future years. The petitioner is actually wanting to convert the depreciation of the Jute Baling business for the year into loss of Jute Trading Business. Furthermore if the petitioner's contention is accepted that the depreciation as separate head shall be carried forward, then it will amount to holding that depreciation is allowable from Jute Trading Business and not Jute Baling business from which the said depreciation has arisen. Again the contention of the petitioner can only be allowed if both Jute Baling and Jute Trading businesses are treated as one, which the Income-tax Officer after the appeal could not do. In this connection a decision of the West Pakistan High Court, Karachi Bench reported in Haji Abdul Qayum v. Commissioner of Income-tax , may be cited where the assessee sought to carry forward and set off the loss from the business of buying and selling wholesale textile goods from the profit of textile Industry but he was not allowed to do so on the ground that the aforesaid businesses were not the same business. There is another decision to the same effect reported in PLD 1951 Lah. 311.
11. The contention of the petitioner can be looked into by illustrating the method of calculation as done by the Income-tax Officer and as asserted by the petitioner :- The Income-tax Officer computed as follows : Total Income-tax Officer computed Trading BusinessRs. 2, 49,538 Less profit from Jute Baling Business Rs. 1,95,449 Less depreciation allowance Rs. 46,941 Rs. 1,48,508 Net loss carried-forward in Jute Trading BusinessRs. 1,01,030 The petitioner contends that the computation should be as follows :- Total loss on account of Jute Trading BusinessRs. 2,49,538 Less profit from Jute Baling Rs. 1,95,449 Net loss Rs. 54,089 Depreciation allowance Rs. 46,941 Rs. 1,01,0301 Now if we take note the calculation by the Income-tax Officer, we find that he has first taken the profit earned in Jute Baling Business and then has deducted the depreciation of that year from the profit of the same Jute Baling Business, and the resultant profit has been deducted from the loss of Jute Trading Business. If we take the calculation of the petitioner we find that it has treated the depreciation as unabsorbed for the year but this is an inconsistant position in that though there has been enough profit from Jute Baling Business, still it is being treated as unabsorbed for the purpose of carrying forward and it is not in conformity with the provisions of section 10(2)(vi) proviso (b) as the section clearly provides that carrying forward of depreciation is permissible if there is not sufficient profit in that year. In the present case there is more than sufficient profit in the Jute Baling Business to give full effect of deduction to the depreciation. To do otherwise will be against the provision of law. The petitioner by his faulty calculation is wanting to convert the part loss of Jute Trading Business into depreciation, which the petitioner is not permitted in law to do.
12. This calculation may be allowed if both the businesses are treated as one. This again cannot be done for the reason stated above.
13. Regarding the power of rectification under section 35 of the Act the decision, Sh. Mohammad Iftikharul Haq v. Income-tax Officer, Bahawalpur may be referred to where due to mistake and oversight super tax though leviable on the assessee was taxed and it was sought to be so taxed under section 35 of the Act by way of rectification. Cornelius, C. J. approving the action of the Income-tax Officer held: "There had been an oversight in respect of the imposition of the super tax for which no enquiry regarding income, profits etc. is necessary beyond that which is requisite for the imposition of income-tax. That process had been gone through in the case of this firm and in order to assess super tax on ascertainment of income, a simple mathematical formula had to be applied, which cannot fall within the meaning of ascertainment of facts. An oversight is clearly a mistake of inadvertance and as such a mistake within the meaning of section 35 aforesaid ".
14. In another decision, Sidhramappa Andannadapa Manri v. The Commissioner of Income-tax, Bombay , Chagla, C. J. has observed with reference to section 35 of the Income-tax Act as follows : "Now the power is undoubtedly a limited power ; it is not a power of revision or review but it is limited to correcting only those mistakes which are apparent on the record. A mistake must be patent on the record, it must not be a mistake which can be discovered by process of elucidation or argument or debate. The mistake being patent on record, rectification must be limited to correcting that mistake only without any further argument or debate. The rectification must follow as a necessary logical consequence of the mistake being found on record."
15. It has been already found in the present case that the alleged rectification of mistake will require more than elucidation, of argument or debate as the rectification cannot be done without setting aside the finding confined up to appellate stage that Jute Baling and Jute Trading Businesses of the petitioner are distinct' and separate businesses. Reversing of this finding will amount to not only reviewing the case but a de novo assessment of the whole case. This is beyond the scope of the provision of section 35 of the Act. The Income-tax Officer to when the application under section 35 was made and the Income-tax Commissioner before whom the revision was filed were justified in rejecting the contention of the petitioner. The contention of the learned Advocate for the petitioner, therefore fails and the rule is discharged without any order as to cost.
16. SIDDIKY, C. J.--I agree. P L P 1963 Kar. 496 PLD 1966 SC 524 (1952) 21 I T R 333 2 3 1 2 3