TMI Blog1972 (7) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... : H. N. SETH., R. L. GULATI. JUDGMENT The judgment of the court was delivered by R. L. GULATI J.-This is a petition under article 226 of the Constitution and raises an interesting question relating to the interpretation of sections 32 and 75 of the Income-tax Act, 1961. The petitioner is a partnership firm which is registered under the Income-tax Act. The assessment year involved is 1966-67. The Income-tax Officer by an assessment order dated November 14, 1969, assessed the net income of the petitioner at Rs. 1,02,881. The petitioner was aggrieved with the assessment order inasmuch as no adjustment was given in respect of development rebate and depreciation allowance and losses of the earlier years were not set off against the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f mistakes apparent on the face of the record. The petitioner then moved the Commissioner of Income-tax under section 264 with a prayer that the assessment order passed by the Income-tax Officer be revised. The Commissioner has dismissed this application holding that the claim put forward by the petitioner is not tenable under the law. The petitioner has now challenged the order of the Commissioner as also of the Income-tax Officer. The contention put forward on behalf of the petitioner is that the losses of the preceding years should have been carried forward and set off against the total income of the firm for purposes of determination of the " firm tax ". It is not disputed that the losses including depreciation of the preceding years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation shall be carried forward and added to the depreciation allowance of the following year. But this principle is not applicable to registered firms or to unregistered firms assessed as registered firms. The reason is that such depreciation allowance along with net loss, if any, of the firm is allocated to the partners, who alone are entitled to set if off against their Individual income and carry forward the unabsorbed depreciation in subsequent years. Sections 72 to 75 deal with carry forward and set off of business loss. The same principle is followed in respect of business loss also, so that the business loss of one year which cannot be set off against income from other heads is carried forward and set off against the business prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puted in the assessment of the firm should be carried forward and set off against its business profits of the subsequent years. In other words, what is contended is that the prohibition contained in sub-section (2) of section 32 and sub-section (2) of section 75 should be restricted to that income of the firm which is allocated between the partners and on which the firm does not pay any tax, but such restriction should not be made applicable to the determination of the income of the firm for purposes of levy of " firm tax ". Reliance for this proposition is placed upon a decision of the Income-tax Appellate Tribunal, Bombay Bench " A ", in P. Co., Bombay v. 8th Income-tax Officer, A-Ward, Section I, Bombay. In that case a distinction was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss of that year alone are to be taken into consideration. The carry forward of losses of earlier years are permitted only because of specific provision in that regard in the Income-tax Act. If that provision is not applicable, the losses of earlier years cannot be taken into consideration. The result is that if the " firm tax " is considered to be a part of the income-tax, then the carry forward of the depreciation and losses is not permissible in the case of a registered firm in view of the prohibition contained in sub-section (2) of section 32 and sub-section (2) of section 75. If, on the other hand, the " firm tax " is considered to be a tax of a different nature, then also the carry forward of loss and depreciation is not permissible ..... X X X X Extracts X X X X X X X X Extracts X X X X
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