P.Chakravartti, C.J. - (1.) This Reference under Section 66 (1) of the Income-tax Act, involves a point which, though short, is somewhat tricky.
(2.) The assessee is a company, called the Alluminium Corporation of India Limited and the assessment year in question is 1949-50. It appears that during the accounting year 1948-49, relative to that year of assessment, the assessee company showed a profit of Rs. 9,56,479/-which was done without deduction of the depreciation due for that year. The amount of depreciation allowance to which the assessee wag entitled in respect of its working during the year in question was Rs. 12,52,117/-. The Income-tax Officer set off that depreciation against the pro-fit and determined the difference, namely, Rs. 2,95,638/-, as the loss for the year. The amount so determined as loss was directed to be carried over to the next year as unabsorbed depreciation.
(3.) The company, however, had an amount of Rs. 27,359/- as loss carried forward from earlier years. Before the Income-tax Officer it was contended that against the year's profit of Rs. 9,56,479/-, the amount of the loss carried forward from the previous years, namely, Rs. 27,359/-, should first be set off and then should be set off, as against the balance of the profits, the depreciation allowance due for the year, that is to say Rs. 12,52,117/-. The difference between the method followed by the Income-tax Officer and that contended for by the assesses would be this : according to the determination of the Income-tax Officer two amounts were to be carried forward to the next year, namely, Rs. 2,95,638/- as unabsorbed depreciation fop the year and Rs. 27,359/- as the loss brought up from the earlier years. If the method suggested by the assessee was followed, only one sum, namely, Rs. 3,22,997/- would be carried forward as unabsorbed depreciation. It will be noticed that the total of the two sums directed to be carried forward under the Income-tax Officer's determination was the same sum of Rs. 3,22,997/-, but it would be to the assessee's advantage, under the law as it then stood, to have the two amounts carried forward as unabsorbed depreciation in one sum, because whereas loss could be carried forward for only six years, there was no time limit at all with regard to the carrying forward of unabsorbed depreciation.;