TMI Blog1973 (4) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... bsorbed depreciation and whether depreciable assets of the original business should be utilised in the new business - - - - - Dated:- 25-4-1973 - Judge(s) : R. L. GULATI., C. S. P. SINGH. JUDGMENT The judgment of the court was delivered by GULATI J.-The assessee is a private limited company. Up to the previous year, relevant to the assessment year 1956-57, the assessee was carrying on a business of manufacture of soap and oil. This business was stopped in 1955. The factory thereafter used to be let out on hire. In the previous year, relevant to the assessment year 1965-66, which is the year in dispute the assessee started a business of manufacture of steel pipes and a part of the old machinery used for the manufacture of soap and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee in the accounting period relevant to the assessment year 1965-66?" Section 28 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), provides for the levy of tax on profits and gains of a business. Such profits have to be computed in accordance with the provisions contained in sections 30 to 43 of the Act (section 29). Section 32 provides for an allowance on account of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business (section 32(1) (ii)). Sub-section (2) of section 32 provides for carry forward of unabsorbed depreciation. That provision is material and reads : " 32. (2) Where, in the assessment of the assessee (or, if the assessee is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There are similar provisions for set-off and carry-forward of losses. These provisions are to be found in sections 71 and 72 of the Act. Under section 71 of the Act, loss under one head (except the capital gains) is set off against income under any other head. Section 72 provides for the carry-forward of unabsorbed loss arising under the head " Profits and gains of a business or profession ". Section 72(1) provides that if such loss cannot be set off against income under other heads, then the balance of the loss not so set off, shall be carried forward and set off against the profits and gains of the business of the next assessment year. However, there are two conditions for the carry-forward of loss : " (i) it shall be set off against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no business there can be no depreciation allowance. It is also not necessary that the business in the succeeding year must have some depreciable assets so that even if there is no depreciation allowance available to the assessee in the succeeding year, by fiction, the unabsorbed carried-forward depreciation of the earlier year shall be deemed to be the depreciation allowance of the succeeding year and shall be an allowable deduction out of the business profits. The other distinction is that while the unabsorbed loss can be carried-forward only for eight years, there is no time limit for the carry-forward of the unabsorbed depreciation. That is why section 72(2) provides that where unabsorbed depreciation and business loss are both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the unabsorbed depreciation of earlier year, the assessee must establish that the business in respect of which it was allowed, continued in the previous year relevant to the assessment year. That case fully supports the stand taken by the department, but, with respect, we are unable to agree with the view of the Bombay High Court, which is contrary to the plain language of section 32(2) of the Act. The Tribunal had tried to distinguish the Bombay High Court decision on the ground that while in the instant case a part of the machinery used in the old business was utilised in the new business, such was not the position in the case before the Bombay High Court. This distinction is not valid. We have already pointed out that for the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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