MONOGRAM MILLS COMPANY LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case, at the instance of the assessee, the following questions have been referred to us for our opinion:

(2.) THE facts leading to this reference are as follows: The assessment year under consideration is 1970 71, corresponding to calendar year 1969. The assessee is a limited company carrying on the business of manufacture and sale of cotton cloth. The ITO computed the income of the assessee at Rs. 15,92,301. From this he made certain deductions on account of telephone deposit, depreciation, business losses carried forward from earlier years and unabsorbed carried forward depreciation at Rs. 5,73,136. The ITO also assessed a share of profit from Monotes Sales Agency. The assessee, on the other hand, claimed that the development rebate should have been given priority over the business losses of earlier years and unabsorbed depreciation. The ITO did not agree with the contention of the assessee and rejected those contentions. Thereafter the matter was taken up in appeal to the AAC, who agreed with the ITO and confirmed his order. Thereafter, the assessee took the matter in further appeal before the Tribunal. Before that body the contention of the assessee was that the depreciation, development rebate and the losses should be set off in the following manner:

(3.) IN order to appreciate the contentions which have been urged on behalf of the assessee certain figures should be noted at this stage. In the assessment year under consideration, so far as the assessee is concerned, there was a total carried forward development rebate of Rs. 3,30,891. This unabsorbed development rebate was being carried forward from the year 1963 64. The assessee had carried forward business loss for the asst. year 1964 65 at Rs. 4,49,663 and carried forward unabsorbed depreciation for various years at Rs. 21,91,060. As we have pointed out above, the figure of the total profit before the provisions regarding the setting off of carried forward business losses, unabsorbed depreciation and unabsorbed development rebate could be considered was Rs. 15,91,801, because, out of the amount of Rs. 15,92,301, a small item of Rs. 500 on account of telephone deposit and sukhary account was allowed to be deducted and the figure finally arrived at was Rs. 15,91,801.