CA India — AKHBKnowledge Hub

HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE

Commissioner of Income Tax, U.P. v. Shah Sadiq and Sons

Civil Appeal No. 1598 (NT) of 1974
[1987] 2 SCR 942 ·
75(1)–(2) (historical losses of registered firms) · 297(2), particularly 297(2)(b) (repeal and savings)

Reasoned final decisionAssessee
Download AKHB noteFive-part research note
Sources & disclosures includedDownload original judgment / order

Two-judge bench · Sabyasachi Mukharji, J. · S. Natarajan, J.

Assessment years: 1962-63

01 · Facts of the case

The assessee partnership was a registered firm in AYs 1960-61, 1961-62 and 1962-63. It incurred speculation losses of Rs 60,054 and Rs 6,839 in the first two years, available for carry-forward against speculation profits. For AY 1962-63 it sought to set both losses against that year’s speculation profit. The report first states Rs 58,102 and later prints Rs 59,102 on the same judicial page; the discrepancy is retained rather than a precise net carry-forward balance being invented. Either printed profit figure was wholly absorbed by the stated earlier losses (physical pages 3–4 / SCR 944–945).

The ITO refused the firm’s claim on the ground that, as a registered firm, only its partners could carry forward and set off the losses. The first appeal failed. The Tribunal allowed the claim because the accrued right arose under the 1922 Act and was not displaced merely by repeal. The Allahabad High Court, in its judgment dated 26 February 1971 in I.T. Reference No. 92 of 1966, upheld the firm’s entitlement using section 6 of the General Clauses Act. Revenue appealed. The assessee did not appear at the hearing; Dhananjoy Chandrachud assisted as amicus curiae (physical pages 3–5, 10–11 / SCR 944–946, 951–952).

Source: See the proposition-specific paragraph and PDF-page references below.

02 · Discussion by the Hon’ble Court

Section 24(2) of the 1922 Act gave the firm an accrued, vested right to carry forward its unabsorbed speculation losses. Revenue relied on historical section 75 of the 1961 Act, under which losses of a registered firm were apportioned among the partners and the firm was not entitled to carry forward under the identified provisions. It argued that AY 1962-63 had to be assessed under that new scheme (physical pages 5–6 / SCR 946–947).

The Court rejected the view in the separate Allahabad decision Mangiram Gopi Chand, 111 ITR 807, that section 297(2) was an exhaustive code whose failure expressly to save these losses extinguished the right. Neither section 297(2)(b) nor any other sub-clause showed such a contrary legislative intention. Historical section 75(2) introduced a different loss scheme but did not, expressly or by necessary implication, destroy already accrued rights under section 24(2) (physical pages 6–10 / SCR 947–951).

Under section 6(c) of the General Clauses Act, an accrued right survives repeal unless the later statute takes it away expressly or by necessary implication. An express savings clause need not list every right that survives. What was omitted from section 297’s express savings was not thereby automatically destroyed. The Court used T.S. Baliah and B.P. (India) Ltd. to support that approach; their prosecution and business-discontinuance facts were distinct from this speculation-loss claim (physical pages 8–10 / SCR 949–951).

Reliance Jute Mills, Helen Rubber Industries and Karimtharuvi Tea Estate did not resolve this controversy: the Court distinguished their amendment, territorial-tax and timing settings from the survival of the vested right here. It accepted the judgment under appeal and expressly rejected Mangiram Gopi Chand’s contrary view. The governing formulation includes express words or necessary implication; the shorter statement later on page 10 about rights taken away expressly is not treated as eliminating the necessary-implication qualification stated in the same reasons (physical pages 7–10 / SCR 948–951).

Source: See the proposition-specific paragraph and PDF-page references below.

03 · Judicial decision

Revenue’s appeal was dismissed. The High Court’s answer permitting the earlier speculation losses to be set off against AY 1962-63 speculation profits stood affirmed. Costs were assessed at Rs 2,500, expressly payable to the amicus curiae. The order did not make a new quantified assessment or direct those costs to the absent assessee (physical pages 10–11 / SCR 951–952).

Source: See the proposition-specific paragraph and PDF-page references below.

04 · Outcome / in whose favour

In whose favour: Assessee

Revenue appeal dismissed; costs Rs 2,500 to be paid to amicus curiae

Final recognition of the saved accrued speculation-loss right for the AY 1962-63 claim

Concerns losses already accrued under the 1922 Act and the particular 1961-Act repeal/new scheme; no general immunity of all loss carry-forwards from later express or necessarily implied legislative change.

Source: See the proposition-specific paragraph and PDF-page references below.

05 · AKHB REVIEW POINT

Start with when and under what provision the right accrued, then examine the repealing enactment for an express or necessarily implied contrary intention. A general rule that the assessment-year law governs does not by itself answer whether repeal destroyed an existing substantive right. Section 297 and the historical section 75 scheme were actually decided, so an old loss year does not make this a 1922-only authority.

Keep the firm’s saved pre-repeal claim separate from ordinary losses arising under the new registered-firm scheme. The decision does not allow every taxpayer to freeze all historical loss rules indefinitely, nor does it dispense with proof of the accrued right and applicable conditions. Preserve both earlier loss years, the disputed-year profit discrepancy, the necessary-implication qualification and the unusual amicus costs direction. Current legislation and comprehensive later treatment require separate verification.

Source: See the proposition-specific paragraph and PDF-page references below.

Proposition-specific source paragraphs and PDF pages

  • topic
    Identity, date, author and full docket
    source url
    Open cited source
    pdf pages
    1; 3
    reporter pinpoint
    SCR 942, 944
    paragraphs
    Unnumbered judicial text unless expressly identified as report metadata
    source role
    reported metadata and judicial text
  • topic
    Loss years, figures, profit discrepancy, reference and appellate path
    source url
    Open cited source
    pdf pages
    3; 4; 5
    reporter pinpoint
    SCR 944–946
    paragraphs
    Unnumbered judicial text unless expressly identified as report metadata
    source role
    judicial text
  • topic
    Historical section 75 scheme and Revenue position
    source url
    Open cited source
    pdf pages
    5; 6
    reporter pinpoint
    SCR 946–947
    paragraphs
    Unnumbered judicial text unless expressly identified as report metadata
    source role
    judicial text
  • topic
    Section 297 and rejection of exhaustive-savings approach
    source url
    Open cited source
    pdf pages
    6; 7; 8
    reporter pinpoint
    SCR 947–949
    paragraphs
    Unnumbered judicial text unless expressly identified as report metadata
    source role
    judicial text
  • topic
    Section 6(c), section 75 and vested-right holding
    source url
    Open cited source
    pdf pages
    8; 9; 10
    reporter pinpoint
    SCR 949–951
    paragraphs
    Unnumbered judicial text unless expressly identified as report metadata
    source role
    judicial text
  • topic
    Distinguished authorities and Mangiram Gopi Chand rejection
    source url
    Open cited source
    pdf pages
    7; 8; 9; 10
    reporter pinpoint
    SCR 948–951
    paragraphs
    Unnumbered judicial text unless expressly identified as report metadata
    source role
    judicial text
  • topic
    Dismissal and exact amicus costs direction
    source url
    Open cited source
    pdf pages
    10; 11
    reporter pinpoint
    SCR 951–952
    paragraphs
    Unnumbered judicial text unless expressly identified as report metadata
    source role
    judicial text

Judicial authorship and separate opinions

Sabyasachi Mukharji, J.

Other statutory context

Indian Income-tax Act, 1922, section 24(2): source of accrued right to carry forward speculation losses; General Clauses Act, 1897, section 6(c): preservation of accrued rights absent contrary legislative intention; General Clauses Act section 6(e) and 1922 Act sections 25(3), 25(4) and 52 arise in cited authorities, not independent disputes decided here

Act identified in the reviewed source

Income-tax Act, 1961

Assessment-year context and limits

AY 1962-63 is the set-off year under appeal; speculation losses arose in AYs 1960-61 and 1961-62 under the 1922 Act.

Source & verification

Download original judgment / order · Open cited source rendition

Identified source rendition: 11 PDF pages; SHA-256 89936b2832e9160d2f968c22bbe673456784ccb47785dccea67060313e408518. Original bytes preserved. Judicial reasons begin at physical page 3/SCR 944 and end at physical page 11/SCR 952. Editorial headnote pages 1–3 is distinct. No adjacent judgment.

  • Physical page 4/SCR 945 first states AY 1962-63 profit of Rs 58,102 and later prints Rs 59,102. The image confirms both figures; no net remaining loss is calculated in this note.; Physical page 4, when recounting the Tribunal, prints that section 75(2) was applicable to AY 1960-61. The Court’s own analysis at pages 5–6 identifies the 1961 Act commencing on 1 April 1962 and the disputed AY 1962-63. The inconsistent recital is not used as a statutory-version conclusion.; Physical page 9/SCR 950 prints General Clauses Act, 1987 in its Baliah discussion; the judgment repeatedly and correctly identifies the General Clauses Act, 1897 elsewhere.; The operative reasoning states survival unless displaced expressly or by necessary implication. A shortened express-only sentence at page 10 is not isolated as an absolute rule.; The headnote labels Mangiram Gopi Chand overruled; the judicial text says the High Court was in error in that decision and right in the judgment under appeal. The note rests on that express judicial rejection.; Docket suffix (NT) is visible on physical page 3 though absent from ingestion metadata. Costs are payable to amicus curiae, not simply described as an award to the respondent.

Statutory scope

No automatic Income-tax Act, 2025 mapping or present-law certification. Historical statutory language and assessment years are retained.

Later treatment

Source checked 2026-10-04. Comprehensive later judicial treatment has not been verified. No current-law certification is made.

Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.

Identified source links

Coverage, AI disclosure & professional disclaimer

Selected Supreme Court income-tax decisions and procedural orders checked against their identified sources. This collection is not exhaustive. The research catalogue has 2,569 indexed PDF assets, including alternate copies and incidental matches; that is not a count of unique or reviewed judgments. Historical and unreported coverage remains open.

AI-assisted research checked against the identified source. Extraction, interpretation or omission errors remain possible. Source review does not mean independent approval by a practising professional. Verify every material statement against the complete original judgment.

General research information only; not legal or tax advice, a certified judgment or a substitute for the full order. Applicability depends on facts, assessment year, statutory version and jurisdiction. Subsequent treatment is unverified unless a note expressly identifies the sources checked. Downloading does not create a professional engagement. Obtain case-specific advice before reliance.

The official 1961–2025 structural correspondence does not establish that a precedent applies under the new Act. Verify the enacted wording, commencement and transitional provisions separately.

Browse Hon’ble Supreme Court judgments