C I T KANPUR Vs. SYNTEX FABRICS

JUDGEMENT

(1.) THE present reference application is filed by the department under the then Section -256(2) of the Income -Tax Act against the judgment and order dated 27.04.1993 passed by the Income -Tax Appellate Tribunal, Allahabad in I.T.A. No. 1304/Alld./1988 for the assessment year 1978 -79.

(2.) THE brief facts of the case are that the business carried out by the assessee was discontinued in the previous year (1977 -78). However, the A.O. made the assessment for the current assessment year on a positive income. During the assessment year under consideration, no business was carried out by the assessee company. Rs. 33,317/ - was earned from other source. The assessee had claimed to set off the loss against the profits as per Section -41(2) of the Income -Tax Act, which was allowed by the A.O. However, C.I.T. has passed an order under Section 263 of the Act and set -aside the assessment order. He directed that only the loss of the business of the year in which the business ceased to exist was allowable and not the losses of earlier year. The C.I.T. further held that an unabsorbed depreciation of earlier years was also not deductible under Section -41(5) of the Income -Tax Act. Hence, as per the direction, the A.O. has modified the assessment order by withdrawing the deduction of Rs. 58,840/ -. However, both the appellate authorities has allowed the claim of the assessee.

(3.) BEING not satisfied, the department has moved an application before the Tribunal for making a reference, accordingly, the present reference is before us.