Decided on August 10,1982



H.S. Ahluwalia, Judicial Member - (1.) THE main dispute in this appeal revolves round the question as to whether the assessee was carrying on business during the relevant accounting year so as to claim the benefits of bad debts, depreciation and set off of unabsorbed depreciation.
(2.) Originally the assessee was carrying on the business of generating and supplying electricity, but the same was acquired by the State Government. During the relevant accounting year, the assessee received interest on the recoverable suspense, i.e., ad-interim purchase consideration from West Bengal State Electricity Board which had taken over all the units from the assessee-company. In the original return the assessee treated this interest as 'income from other sources' but in the revised return it claimed the same as income from 'business'. The ITO was of the opinion that the power supply business that was originally being conducted by the assessee had been entirely taken over by the State Electricity Board and the consideration therefor was nothing but a capital receipt. Therefore, any receipt received or receivable on interest receipt could not be treated as business income because there was no business (sic). For the same reasons, interest receipt from the bank could not be considered as business income because it was not a transaction in the nature of trade. Similarly, incomes from dividend and sundry receipts could not be treated to be a part of business income. He, therefore, disallowed the assessee's claim for depreciation, bad debts, set off of unabsorbed depreciation, etc. Of course in case of bad debts, an additional reason given by the ITO was that they had not become bad during the relevant accounting period. The assessee went in appeal to the Commissioner (Appeals) who was again of the opinion that except for recovery of some interest the assessee had no other business. Similarly, the disallowance of depreciation and carry forward of unabsorbed depreciation was confirmed. The assessee has come up in second appeal before us.
(3.) WE have heard the representatives of the parties at length in this appeal. The main point argued on behalf of the assessee was that it was not necessary that in order to secure the benefits of bad debts and depreciation and carry forward of unabsorbed depreciation, the assessee should be carrying on the same business which it had originally started. All that was required was that some business should have been carried on by the assessee with the same management and control. Reliance was placed upon a judgment of the Supreme Court in CIT v. Prithvi Insurance Co. Ltd. [1967] 63 ITR 632 wherein existence of common management, common business organisation, common administration, common fund and common place of business were held to be sufficient for allowing unabsorbed losses. Similarly, reference was made to another decision of the Supreme Court in B.R. Ltd. v. V.P. Gupta, CIT [1978] 113 ITR 647, wherein a loss in the business of import and sale of fabrics was held to be an allowable deduction against a subsequent income in export of cotton textiles, in view of the common management and control of the business. Again, reference was made to a judgment of the Allahabad High Court in CIT v. Rampur Timber & Turnery Co. Ltd. [1973] 89 ITR 150 and Raj Narain Agarwala v. CIT [1970] 75 ITR 1 (Delhi) for the proposition that carry forward of unabsorbed depreciation could be availed of by an assessee in any subsequent year without satisfaction of the pre-conditions attached to Sub-section (1) of Section 32 of the Act and it was not necessary that in such subsequent year, the assessee actually carried on the business and the assets were used for the purpose of the assessee's business.;

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