COMMISSIONER OF INCOME TAX Vs. COROMANDEL STEELS LIMITED

JUDGEMENT

(1.) IN this reference under s. 256(1) of the I. T. Act, 1961, the following question has been referred :

(2.) THE assessee, carrying on business in structural engineering, was assessed for the assessment years 1970-71 and 1971-72. For the earlier assessment years, it had carried forward business losses, unabsorbed depreciation and unabsorbed development rebate as follows : <FRM>JUDGEMENT_856_ITR130_1981Html1.htm</FRM>

(3.) FOR the department the submission was that in view of the specific provision of s. 72(2) of the Act, the procedure adopt by the ITO was correct. The Tribunal, following the decision of the Calcutta High Court in Aluminium Corporation of India Ltd. v. CIT [1958] 33 ITR 367, held that the current year's depreciation was rightly deducted in determining the business income for the two assessment years. The assessee's contention to the contrary thus stood rejected. As regards the unabsorbed business losses of earlier years and unabsorbed depreciation, it was held that the business loss of the earlier years should first be deducted from the business income computed for the relevant assessment years, and that only thereafter the unabsorbed depreciation allowance for the earlier years would come in for adjustment. As regards the unabsorbed development rebate it was held that the ITO should have set off the amounts relating to the assessment years 1962-63 to 1967-68 first and then only taken the business loss relating to the assessment years 1968-69 and 1969-70. Thus, in the view of the Tribunal, the adjustments would be first with reference to the current year's depreciation, then unabsorbed development rebate and thereafter unabsorbed business loss. This order of the Tribunal has given rise to the question referred, which has been set out earlier.