B.P.Jeevan Reddy, J. - (1.) A common question arises in these three appeals. It relates to the meaning and interpretation of sub-section (2) of Section 32 of the Income-tax Act. It would be enough if we state the facts in Civil Appeal No. 1052 of 1976.
(2.) The respondent-assessee, Virmani Industries Private Limited, was engaged in the manufacture of soap and oil during the previous year relevant to the Assessment Year 1956-57. The business was stopped in that year whereafter the factory was let out on hire. Ten years later, i.e., in the previous year relevant to Assessment Year 1965-66, the assessee started the business of manufacture of steel pipes. For the purpose of this business a part of the old machinery used in the manufacture of soap and oil was utilised.
(3.) In the assessment proceedings relating to Assessment Year 1956-57, depreciation under Section 32(1)(ii) was found to be more than the profits and gains of the assesses for that assessment year. In the assessment proceedings relating to Assessment Year 1965-66, the assessee claimed that the unabsorbed depreciation, to the extent it pertained to the old machinery utilised in the new business, should be brought forward and set off against the profits of the new business. This claim was rejected by the Income-tax Officer and by the Appellate Assistant Commissioner on the ground that such a set off is permissible only where the business carried on in the subsequent assessment year is the same business which was carried on in the earlier assessment year. The Income-tax Appellate Tribunal, however, disagreed with the said view and upheld the assessees claim. At the request of the Revenue, the Tribunal referred the following question to the Allahabad High Court under Section 256(1) of the Income-tax Act, 1961: "Whether on the facts and in the circumstances of the case the unabsorbed depreciation in respect of apart of the machinery used in the soap and oil manufacturing business which was again used for the new business of manufacture of steel pipes should be allowed to be set off against the profits of the new business of manufacture of steel pipes carried on by the assessee in the accounting period relevant to the assessment year 1965-66 -. ;