Satish Chandra, J. - (1.) THE Tribunal has submitted this statement of the case for opinion of this court on the following question of law : " Whether, on the facts and in the circumstances of the case, the depreciation allowance determined for the assessment years 1951-52 to 1954-55 should be set off against the sum of Rs. 6.982 assessed under Section 41(2) ? "
(2.) DURING the previous year relevant to the assessment year 1962-63, the assessee received a refund of Rs. 6,982 by way of electricity charges. This sum had been allowed as an expenditure in an assessment prior to 1955-56 while the assessee was carrying on business. The assessee claimed that this refund was liable to be adjusted against the unabsorbed depreciation for the years 1951-52 to 1954-55 amounting to Rs. 46,003. The Judicial Member of the Tribunal upheld this contention while the Accountant Member was of the contrary opinion. According to him the refund which was chargeable to tax under Section 41(1) could not be adjusted against the depreciation for previous years because no business had been carried on in the previous year relevant to 1961-62 and that the machineries, etc., had not been used for that purpose during that year. In view of this difference of opinion, the matter was heard by the President of the Tribunal. We have perused the orders of the differing Members as also of Sri T. P. Mukerji, the President (who later joined the Bench of this court), and having heard learned counsel we are in entire agreement with the views expressed by the President. The learned President held : This case has been referred to me under Section 255(4) of the Income-tax Act, 1961, by the learned Members of the Delhi Bench 'C' who had differed on the following question of law : "Whether the profit of Rs. 6,982 assessed under Section 41(1) should be set off against the depreciation allowance determined for the assessment years 1951-52 to 1954-55?" The material facts have been set out in detail in the orders of the learned Members. To repeat them briefly, the assessee is a limited company, which was, uptill the year 1954-55, carrying on business in the manufacture of bobbins, etc. It stopped doing that business with effect from the previous year relevant to the assessment year 1955-56 though it continued to own the plant, machinery, etc. Thereafter, the assessee continued to be assessed only in respect of income from property which it owned and possessed. Daring the previous year relevant to the assessment year 1962-63 under appeal, the assessee received a refund of Rs. 6,982 from the Hydel Electric Department out of electricity charges already paid by it in the above years when it was carrying on the business aforesaid. The electricity charges to which the refund related had been allowed to the assessee as an expenditure of the business in the preceding assessments. During the assessment for the assessment year 1962-63, the Income-tax Officer taxed the aforesaid amount of Rs. 6,982 as the business income of the assessee in view of the provisions of Section 41(1). The total income assessed for that year was Rs. 16,114 which consisted of the following two items : JUDGEMENT_150_ITR89_1973Html1.htm
(3.) THE total business loss suffered by the assessee during the 4 assessment years 1951-52 to 1954-55 amounted to about Rs. 3 lakhs and unabsorbed depreciation for the same years amounted to Rs. 46,003, Both the learned Members are in agreement that the unabsorbed business loss for the past years could not be set off against the sum of Rs. 6,982 which was assessed as business income of the assessee, for the assessment year 1962-63, under the provisions of Section 41(1). THE Members have, however, differed on the question of the set-off of unabsorbed depreciation against the same amount. THE learned Accountant Member is of the view that the unabsorbed depreciation could not be carried forward and set off against the income determined under Section 4-1(1), because, in the first place, the building, plant and machinery owned by the assessee were not used for the purpose of business in the previous year relevant to the assessment year 1962-63 and, secondly, because no business was carried on by the assessee during the said previous yeir. THE learred Judicial Member was of the view that unabsorbed depreciation could be carried forward, under the provisions of Section 32(2) even if the business had ceased to exist and the plant and machinery were not used for the purposes of business. In his opinion, the provisions of Section 32(2) under which unabsorbed depreciation can be carried forward are independent of the provisions of Section 32(1) under which depreciation is allowable in the year in which business is carried on and the plant and machinery are used. As the learned Judicial Member has observed, the question which presents itself in this case is not covered by authorities and should be regarded as res Integra. I have considered carefully the relevant provisions of law bearing on the question and am inclined to agree with the view taken by the learned Judicial Member.;