Chandurkar, J.:— The following two questions have been referred by the Income-tax Appellate Tribunal, Bombay Bench “B”, to this court under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as “the Act”):

“1. Whether the assessee is entitled to deduct the business loss of Rs. 1,38,756 for 1957-58, in computing its total income for 1958-59, for the purpose of levying the tax on registered firms?

2. Whether the assessee is entitled to deduct the unabsorbed depreciation of Rs. 1,12,283 and Rs. 2,15,911 from the profits of the year to arrive at the total income for the material year?”

2. These questions arise on the following facts:

The assessee, M/s. Ballarpur Collieries Company, Nagpur, is a registered firm carrying on business of coal mining. In the assessment year 1956-57, the assessee's income was Rs. 9,236 before adjustment of depreciation. The depreciation allowable for that year was Rs. 1,21,519. After setting off the depreciation to the extent of profits there was unabsorbed depreciation of Rs. 1,12,283. In the following year, namely, the assessment year 1957-58, there was a business loss of Rs. 1,38,756. This was before making allowance for the depreciation of Rs. 2,15,911 for that year. In the assessment year 1958-59, after making allowance for the depreciation and the development rebate allowable for that year, the total income of the assessee-firm was determined by the Income-tax Officer at Rs. 5,24,035. This income was asssessed by the Income-tax Officer under section 23(3) of the Act and these profits were allocated among the partners in accordance with their shares. The assessee-firm was not satisfied with this order of the Income-tax Officer and it filed an appeal before the Appellate Assistant Commissioner of Income-tax, Akola Range, Akola. Before the Appellate Assistant Commissioner the contention raised was that the aggregate losses of the earlier two years should be set off against the income of Rs. 5,24,035 before tax was levied on the registered firm. This contention was rejected by the Appellate Assistant Commissioner and he substantially maintained the assessment order passed by the Income-tax Officer except that a deduction of Rs. 600 paid as salary to an employee was allowed.

3. When the matter was taken to the Income-tax Appellate Tribunal, two contentions were raised. The first contention was that the unabsorbed depreciation of Rs. 1,12,283 in respect of the assessment year 1956-57 and of Rs. 2,15,911 in respect of the assessment year 1957-58 should be deducted from the income of Rs. 5,24,035 to arrive at the income of the firm for the material year. The second contention was that after the income of the firm was determined as above, the business loss of Rs. 1,38,756 for the assessment year 1957-58 should also be deducted before levying the tax on the registered firm. On the first contention the Tribunal held that the unabsorbed depreciation in the partner's hands was available for set off by the firm itself in the following year in view of the provisions of proviso (b) to section 10(2)(vi) of the Act. Before the Tribunal it appears that it was contended for the assessee that the depreciation for 1956-57 and 1957-58 had not been absorbed by the other income of the partners. Subject to the verification of this fact, the Tribunal found that the unabsorbed depreciation for the years 1956-57 and 1957-58, could be set off by the firm against the income for the year 1958-59. On the second contention the Tribunal found that the firm was not entitled to have the business loss of Rs. 1,38,756 for the year 1957-58 deducted before it was assessed to tax under section 23(5) of the Act. The first question reproduced above was referred to this court at the instance of the assessee and the second question was referred at the instance of the revenue.

4. We shall first take up the second question. In order to appreciate the contentions raised on behalf of the revenue, it is necessary to reproduce some relevant provisions of the Act. Sub-sections (5) and (6) of section 23 of the Act which provides for the assessment of a firm are as follows:

“Notwithstanding anything contained in the foregoing sub-sections, when the assessee is a firm and the total income of the firm has been assessed under sub-section (1), sub-section (3) or sub-section (4), as the case may be,—

(a) in the case of a registered firm,

(i) the income-tax payable by the firm itself shall be determined; and

(ii) the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, shall be assessed and the sum payable by him on the basis of such assessment shall be determined:

Provided that if such share of any partner is a loss it shall be set off against his other income or carried forward and set off in accordance with the provisions of section 24:………….

(6) Whenever the Income-tax Officer makes a determination in accordance with the provisions of sub-section (5), he shall notify to the firm by an order in writing the amount of the total income on which the determination has been based and the apportionment thereof between the several partners.”

5. The relevant provisions of section 24 which provide for a set-off of a loss in computing aggregate income are as follows:

“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 further that……… where the assessee is a registered firm, any loss which cannot be set off against other income, profits and gains 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 under this section…..

(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 subsection (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;

(ii) where the loss was sustained by him in any other business, profession or vocation, it shall be set off against the profits and gains, if any, of any business, profession or vocation carried on by him in that year:

Provided that the business, profession or vocation in which the loss was originally sustained continued to be carried on by him in that year; and

(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 ……

Provided that …….

(b) where depreciation allowance is, under clause (b) of the proviso to clause (vi) of sub-section (2) of section 10, also to be carried forward, effect shall first be given to the provisions of this sub-section;

(c) nothing herein contained shall entitle any assessee, being a registered firm, to have carried forward and set off any loss which has been apportioned between the partners, under the proviso to sub-section (1), or entitle any assessee, being a partner in an unregistered firm which has not been assessed under the provisions of clause (b) of sub-section (5) of section 23, to have carried forward and set off against his own income any loss sustained by the firm;………….”

6. Sub-section (1) and the relevant part of sub-section (2) of section 10 which deals with carrying forward of unabsorbed depreciation are as follows:

“10. Business.—(1) The tax shall be payable by an assessee under the head ‘Profits and gains of business, profession or vocation’ in respect of the profits and gains of any business, profession or vocation carried on by him.

(2) Such profits or gains shall be computed after making the following allowances, namely:— ……..

(vi) In respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent,……………..

Provided that—

(a) the prescribed particulars have been duly furnished;

(b) where, in the assessment of the assessee or if the assessee is a registered firm, in the assessment of its partners, full effect cannot be given to any such allowance in any year not being a year which ended prior to the 1st day of April, 1939, owing to there being no profits or gains chargeable for that year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of clause (b) of the proviso to sub-section (2) of section 24, the allowance or part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following year and deemed to be part of that allowance, or if there is no such allowance for that year, be deemed to be the allowance for that year, and so on for succeeding years; and……….”

7. Now, it is contended on behalf of the revenue that, in view of proviso (c) to section 24(2) of the Act, a registered firm is not entitled to have any loss which is apportioned to the partners carried forward, and the Tribunal has lost sight of this legal position when it permitted the loss resulting on account of unabsorbed depreciation and which is already allocated to the shares of the partners to be set off for the purpose of determining the taxable income of the firm for the assessment year 1958-59. It is urged that even under proviso (b) to section 10(2)(vi) it is only the assessment of the partners which is required to be looked at and that once the loss resulting on account of unabsorbed depreciation is allocated to the shares of the partners, the firm itself cannot claim a right to carry forward the unabsorbed depreciation so as to have it deducted from its income before the taxable income of the firm is determined. On the other hand, it is contended on behalf of the assessee that the right to carry forward unabsorbed depreciation is given by proviso (b) to section 10(2)(vi) and by the very terms of section 10(2)(vi) the depreciation which has remained unabsorbed had to be taken into account before the income for the year in question of the firm was computed. It cannot be disputed that for a determination of the profits under the head “income from business” all allowances permissible under section 10(2) must be deducted. Under section 10(2)(vi) permissible depreciation allowance has to be deducted when the profits and gains of business, profession or vocation carried on by an assessee are to be computed for the purpose of determining the tax which is payable by the assessee. In a given case it is possible that on account of there being no profits or gains chargeable for that year or on account of the profits or gains chargeable being less than the allowance, full effect cannot be given to any such allowance. In such a case, the proviso contemplates that the allowance or part of the allowance to which effect has not been given, as the case may be, is to be added to the amount of the allowance of depreciation for the following year and it is deemed to be a part of that allowance, or if there is no such allowance for that year, it is to be deemed to be the allowance for that year and so on for succeeding years. This is made subject to the provisions of clause (b) of the proviso to sub-section (2) of section 24 which provides that where depreciation allowance is under clause (b) of the proviso to clause (vi) of sub-section (2) of section 10, also to be carried forward, effect shall first be given to the provisions of subsection (2) of section 24. Now, it is clear from the provisions of sub-section (2) of section 24 that no loss is permitted to be carried forward for more than eight years. There is no limitation for carrying forward depreciation allowance and clause (b) of the proviso to sub-section (2) of section 24, therefore, fixes a priority that before unabsorbed depreciation is to be set off, the losses contemplated by sub-section (2) of section 24 must be set off first. Now, what is argued on behalf of the revenue is that when clause (b) of the proviso to clause (vi) of sub-section (2) of section 10 refers to the assessment of the partners in a case where the assessee is a registered firm, the assessment of the partners is a part of the assessment of the firm and the provisions regarding the carrying forward of the unabsorbed depreciation is to be given effect to in the assessment of the partners themselves.

8. It is not possible to accept the argument that the assessment of the partners is a part of the assessment of the firm as an assessee. Under section 23(5) of the Act, when an Income-tax Officer is dealing with the assessment of a registered firm, he has first to determine the income-tax payable by the firm itself and then the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, has to be assessed and the sum payable by the partner on the basis of such assessment is to be determined. What is the nature of the proceedings for the assessment of a firm under section 23(5) of the Act fell for consideration before the Supreme Court in S. Sankappa v. Income-tax Officer [1968] 68 I.T.R 760; [1968] 2 S.C.R 674 S.C.. It was observed by the Supreme Court in that case on pages 766-767:

“In the case of a registered firm, the Income-tax Officer, after computing the income, has to determine the tax payable by the firm itself, and provision is made that, thereafter, the share in the income of the firm of each partner is to be included in his total income for purposes of his individual assessment to tax. It is true that the Income-tax Officer assessing the firm may not be the same officer who may be dealing with the individual assessment of the partners and, in any case, even if he be the same officer, the proceedings for assessment of the partners has to be treated as a separate proceeding; but it is also clear that the proceedings for assessment of the firm under this section do not come to an end merely on computation of the income of the firm and determination of the tax payable by the firm on that income. The Income-tax Officer, who deals with the assessment of the firm, has also to apportion the income of the firm, in the case of a registered firm, between its partners and the notice of that apportionment has to be given under section 23(6) by him to the firm. This apportionment is clearly treated as a part of the proceeding for assessment of the firm and that is why the notice is to be given to the firm. The second proviso to section 30(1) also clarifies this position by laying down that the right of appeal in respect of the apportionment is to be exercised by the partners by filing appeals against the order of assessment of the firm and not against orders made in the course of subsequent proceedings for the individual assessments of the partners themselves. The second proviso to section 23(5)(a) also brings out this position. In certain cases, after the apportionment of the income of the registered firm, the share of a particular partner, who is not resident in the taxable territories, is to be assessed to tax also as if it is the income of the registered firm. All these provisions clearly show that proceedings for assessment of a firm consist of computation of the income of the firm, determination of tax payable by the firm, apportionment of the income of the firm between its partners in the case of a registered firm and, in appropriate cases, imposition of tax on the firm after including the share of the income of certain partners in the income of the firm, even though the firm is registered. The proceedings for assessment of the firm are not completed until all these steps have been taken by the Income-tax Officer, and each one of those steps must be held to be a step in the proceedings for assessment of the firm.”

(Underlining* is ours.)

9. It is clear from these observations of the Supreme Court that the proceedings for the assessment of the firm continue till the income of the firm is apportioned between its partners in the case of a registered firm and in appropriate cases till the imposition of the tax on the firm after including the share of the income of certain partners of the firm, even though the firm is registered, is made. The proceeding for assessment of the partners has been treated as an independent and separate proceeding. Read in the light of the decision of the Supreme Court in Sankappa's case, the reference in section 10(2)(vi), proviso (b), to “the assessment of the partners” in a case where the assessee is a registered firm has to be read only for the purpose of finding whether full effect cannot be given to any allowance permissible under section 10(2) of the Act. This is also clear from the decision of the Supreme Court in Commissioner of Income-tax v. Jaipuria China Clay Mines (P.) Ltd. [1966] 59 I.T.R 555, 559; [1966] 2 S.C.R 449 S.C., in which, dealing with the question whether in the case of a registered firm effect can be given to the depreciation allowance in the assessment of its partners, the Supreme Court observed:

“What is the meaning of the expression ‘in the assessment of the assessee or if the assessee is a registered firm, in the assessment of the partners, full effect cannot be given to any such allowance in any year?’ It would be noted that the words used are ‘in the assessment of the assessee or the assessment of the partners’. Taking the case of the partners of a registered firm, the assessment must be their individual assessments, i.e, assessments in which the profits from the firm and other sources are pooled together. The legislature is clearly assuming that effect can be given to depreciation allowance in the assessment of a partner; the only way effect can be given in the assessment of a partner is by setting it off against income, profits and gains under other heads.”

10. The question, however, is what is to happen when full effect to the depreciation allowance cannot be given in the assessment of the partners. Is it to be carried forward as a loss by the partners and they alone can set it off against their other income or whether it can be carried forward as unabsorbed depreciation as such and should be allowed to be set off by the firm in the succeeding year? It appears to us that though where full effect cannot be given to an allowance while computing the income of the firm a loss will result and this loss is liable to be apportioned between the partners, such loss on account of unabsorbed depreciation, though allocated to the partners, still retains the character of unabsorbed depreciation. This loss is carried forward by virtue of the special provision in section 10(2)(vi), proviso (b), and not by virtue of the general provisions in section 24(2) of the Act. We may usefully refer to a decision of a Division Bench of this court in Commissioner Of Income-Tax, Bombay City I v. Ravi Industries Ltd.. The contention for the revenue in that case was that unabsorbed depreciation was a business loss and carried-forward unabsorbed depreciation was a carried-forward business loss and must therefore be dealt with in the same manner as the carried-forward loss under section 24(2), so far as its availability for set off is concerned. The Division Bench observed:

“It appears to us from the language used in the proviso (b) to section 24(2) that depreciation allowance is treated differently from the carried-forward losses and is not regarded as being of the same category as the carried-forward losses. The main provision of section 24(2) deals with the carried-forward losses. Then the proviso says that where there are not only carried-forward losses but also depreciation allowance, which is carried forward, priority will be given to the carried-forward losses and not to the depreciation allowance. The language used in the proviso appears to us to indicate that section 24(2) is a provision which deals with carried-forward losses while carried-forward depreciation does not come within section 24(2), but flows through an entirely different channel which is provided under section 10(2)(vi), proviso (b)…. The subject of depreciation allowance has been dealt with in section 10(2)(vi). The provision permitting it to be carried forward and the consequence of its being carried forward is also contained in section 10(2)(vi), proviso (b). It is only because both the carried-forward losses under section 24(2) as well as the carried-forward depreciation allowance under section 10(2)(vi), proviso (b), are capable of being adjusted against the profits and gains of the business of the years to which they are carried forward that a provision has been made fixing the order in which they will be absorbed. The fixing of the priority also does not appear to be without a purpose. The carried forward losses are, under section 24(2), capable of being adjusted up to a maximum period of eight years. The depreciation allowance which is permitted to be carried forward is, however, allowed to be carried forward without any time limit until it is totally absorbed……………

………As we have already pointed out, the language of proviso (b) to section 10(2)(vi) gives it the same nature and colour as the depreciation for the current year except so far as its availability for setting off against the profits and gains from business are concerned………. The unabsorbed part of the current year's depreciation goes, no doubt, under section 24 as a loss under the head of business for being set off against the profits under any other head, but that would not have the effect of making the carried-forward part of the unabsorbed depreciation into the following year a carried-forward loss when the provision of the statute clearly and unequivocally states that it will be carried forward as an allowance and treated as a part of the allowance for the next year.”

11. Later, in the same judgment, the Division Bench further observed:

“It is no doubt true that the excess of the current year's depreciation over the profits and gains of the income coming under the head ‘business’ is available for being set off as loss of profits and gains against the income from, other heads of business. But that does not mean that the allowance by way of depreciation, therefore, loses all its character and attributes as an allowance when it is carried forward to the following year not being wholly absorbed during the current year. In view of the provision of section 10(2)(vi), proviso (b), when taken over to the following year, it still retains its character as depreciation allowance and gets added to the current depreciation of the following year when such current depreciation exists for the following year, or becomes current depreciation for the following year where no such current depreciation exists. The only difference which it has from the current depreciation for the following year is as provided under proviso (b) to section 24(2), namely, that its application will be postponed to the prior absorption of the carried-forward losses of the previous year.”

12. This court has thus held that section 24(2) of the Act deals only with carried-forward business losses and that carried-forward depreciation does not come within section 24(2) of the Act. The relative scope of section 24(2) or section 10(2)(vi), proviso (b), of the Act was also considered by the Supreme Court in Commissioner of Income-tax v. Jaipuria China Clay Mines (P.) Ltd. in which it was observed:

“The unabsorbed depreciation allowance is carried forward under proviso (b) to section 10(2)(vi) and the method of carrying it forward is to add it to the amount of the allowance or depreciation in the following year and deeming it to be part of that allowance; the effect of deeming it to be part of that allowance is that it falls in the following year within clause (vi) and has to be deducted as allowance……………But it is wrong to assume that section 24(2) also deals with the carrying forward of depreciation. This carry-forward having been provided in section 10(2)(vi) and in a different manner, section 24(2) only deals with losses other than the losses due to depreciation.”

13. It is thus clear that even though for certain purposes of set-off, loss occasioned on account of unabsorbed depreciation is dealt with under section 24 of the Act, it does not lose its character or nature as unabsorbed depreciation and is carried forward not by virtue of the provisions of section 24(2) but by virtue of the express provisions of section 10(2)(vi), proviso (b).

14. Now, if the carry forward of the unabsorbed depreciation is expressly provided by section 10(2)(vi), proviso (b), and section 24(2) deals with only business losses, proviso (c) to section 24(2) will have to be construed in the light of the construction placed on that section by the Supreme Court. Under the second proviso to section 24(1), any loss which cannot be set off against other income, profits and gains of the firm has to be apportioned between the partners of the firm and they alone are entitled to have the amount of the loss set off under that section. The losses could be carried forward by the partners only by virtue of section 24(2), and since section 24(2) deals only with business losses and does not deal with carrying forward unabsorbed depreciation which is expressly dealt with by section 10(2)(vi), proviso (b), unabsorbed depreciation could not be carried forward by the partners under section 24(2). In our view, since section 24(2) deals only with business losses the loss referred to in proviso (c) to that sub-section cannot be said to include losses on account of unabsorbed depreciation which is taken care of by section 10(2)(vi), proviso (b). Under proviso (b) to section 10(2)(vi) the unabsorbed depreciation allowance has to be added to the allowance for depreciation for the following year. The depreciation allowance in the following year as contemplated by this proviso is available only to the firm as an assessee whose income is to be computed as required by section 23(5)(a)(i) of the Act. Deduction of depreciation allowance is not permissible for computing the income of the partners in their capacity as such. Proviso (b) to section 10(2)(vi), therefore, in our view, clearly contemplates that the assessment of the partners is relevant only for the purpose of ascertaining whether full effect has been given to the depreciation allowance contemplated by section 10(2)(vi). In our view, in the case of a registered firm if full effect has not been given to the depreciation allowance in the assessment of the partners the unabsorbed depreciation allowance has to be given effect to in the succeeding year to which it is carried forward before the income of the firm is determined, except that if there are any carried-forward business losses they have to be given effect to first before the carried-forward depreciation allowance is given effect to in view of the provisions of clause (b) of the proviso to section 24(2).

15. It was urged that the construction which we have placed on clause (b) of the proviso to section 10(2)(vi) is likely to work inequitably as between partners in given circumstances. This fact, however, cannot affect the construction which is the only construction possible we find of the terms of clause (b) of the proviso to section 10(2)(vi). The second question referred to us is, therefore, answered in the affirmative.

16. We shall now take up the first question. The contention of the assessee on the first question is that a registered firm was made liable to pay income-tax by the Finance Act of 1956 for the first time, and since the firm was now being treated as an assessee, before the taxable income of the firm is determined for the purposes of its own assessment, it must be permitted to set off the business losses carried forward from the previous years and, therefore, in the instant case when under section 23(5)(a)(i) the income-tax payable by the assessee-firm itself was being determined in respect of the assessment year 1958-59, the previous losses of Rs. 1,38,756 should be allowed to be set off. It was argued that the tax which was levied on the partners of the firm was a substantive tax and the tax which was levied on the firm itself was a subsidiary tax, and according to Shri Mehta, since the firm was now being treated as an independent unit of assessment, it was as much entitled to the benefit of set-off and carried-forward losses as other assessees and that there was a general right to claim set-off and carry-forward of the losses conferred by the provisions of section 24, and unless these were abridged or abrogated the firm also is entitled to those benefits.

17. It is difficult for us to accept the classification of a substantive tax and a subsidiary tax which is sought to be made on behalf of the assessee for which there is no basis in the Act. It is no doubt true that prior to the enactment of the Finance Act of 1956, income-tax was not payable by the firm itself and what was required to be determined was the total income of each partner of the firm including therein his share of its income, profits and gains of the previous year, and it was this income which was assessed and the sum payable by him on the basis of such assessment had to be determined. The position after the enactment of the Finance Act of 1956 was that income-tax became payable by the firm itself, though the rate is a reduced one, and in the relevant year tax was payable by the firm because its income was more than Rs. 40,000. The manner in which income is to be determined for the purposes of the several provisions of the Income-tax Act is provided by the statute itself. While computing the taxable income in the case of an assessee, there is no general right to set off any business loss, the only right being as provided in the Act. The right to set off the loss is created by section 24 of the Act. In the case of a partnership there is an express provision that where the assessee is a registered firm, any loss which cannot be set off against other income, profits and gains of the firm is to be apportioned between the partners of the firm and they alone are entitled to have the amount of the loss set off under that section. It has not been disputed before us that the provisions of the second proviso to section 24(1) enable the partners alone to have the amount of the loss set off; but what is contended is that since the firm is now treated as an independent assessee after 1956, it must independently be given the benefit of section 24(1) and (2) and it must be allowed to carry forward the past losses in spite of the fact that those losses have been already allocated to its partners. It was, however, conceded that there was no express provision in the Act by virtue of which such a right to carry forward the losses which were already allocated to the partners could be claimed to be carried forward for the purposes of set-off during the year when there were profits. Section 23(5) prescribes that the income-tax payable by the firm itself shall be determined and the determination of the income-tax payable by the firm must precede the determination of the income of the firm itself (sic). Such determination would be regulated and controlled by the express provisions of the Act. The argument which is advanced before us appears to us to be nothing more than a grievance that the same income is taxed twice. In the face of the second proviso to section 24(1) and proviso (c) to section 24(2), it is impossible to hold that the firm can claim the benefit of setting off a business loss which already stands allocated to its partners and which they alone are entitled to set off. The second proviso to section 24(1) which continues in the same terms in which it was before its amendment by the Finance Act of 1956, under which income-tax payable by the firm itself was required to be determined, clearly implies that the right to set off the loss of the previous year was intended to be given only to the partners and not to the firm in spite of its being treated as an independent unit of assessment. This position is further reiterated by proviso (c) to section 24(2) which, as held by the Supreme Court in Commissioner of Income-tax v. Kantilal Nathuchand Sami, “prohibits a claim being made by a registered firm as such to set off loss in future years against profits in that year, which loss has been apportioned between the partners under the proviso to section 24(1).” Proviso (c) to section 24(2) of the Act which deals with business losses is a complete answer to the contention raised on behalf of the assessee-firm. The view taken by the Tribunal that the assessee was not entitled to deduct the business loss of Rs. 1,38,756 for 1957-58, in computing its total income for 1958-59, for the purpose of levying the tax on the registered firm was, therefore, clearly justified. The first question referred to us is thus answered in the negative.

18. We thus answer the first question in the negative and the second in the affirmative. In the circumstances of the case, we make no order as to costs.