COMMISSIONER OF INCOME-TAX, DELHI vs MAHALAXMI SUGAR MILLS CO. LTD.

The Supreme Court held that under Section 24(1) of the Income Tax Act, 1922, dividend income received from a Pakistan company is deductible when calculating total world loss for an Indian assessee. The Court clarified that losses can only be set off against assessable income under Indian law, and since the dividend income was not assessable due to the Agreement for the Avoidance of Double Taxation between India and Pakistan, it cannot be included in the total income for loss set-off. The Delhi High Court's ruling in favor of the assessee was upheld, allowing the appeals by the revenue.