TMI Blog1985 (12) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... came into effect on and from April 1, 1976. The said section reads as follows : Section 44B. - " (1) Notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, engaged in the business of operation of ships, a sum equal to seven and half per cent. of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head ' Profits and gains of business or profession '. (2) The amounts referred to in sub-section (1) shall be the following, namely: (i) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the carriage of passengers, livestock, mail or goods shipped at any port in India; and (ii) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India." The assessees claimed that unabsorbed depreciation as also business loss suffered by them in previous years had been carried forward and should be adjusted against their profits and gains of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows : " So far as business principles and the principles of accountancy are concerned, there is no doubt that the argument of the learned representative is fully justified. Unfortunately for the assessee, so far as the income-tax law is concerned, a clear distinction is drawn between unabsorbed depreciation and business losses. There are two distinct sections dealing with these two items. Unabsorbed business loss is carried forward and set off by virtue of section 72. It can be carried forward only for a period of 8 assessment years immediately succeeding the assessment year for which the loss was first computed. So far as unabsorbed depreciation is concerned, it is on a different footing. Under section 32(2), unabsorbed depreciation is to be added to the amount of depreciation for the subsequent year and deemed to be part of the depreciation of the subsequent year. It can be carried forward indefinitely. In other words, unabsorbed depreciation of earlier years is to be treated as part of the depreciation of the year. In other words, where the assessment is made under section 44B, the assessee is not entitled to any of the deductions mentioned in sections 28 to 43A. This con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting period relevant to the assessment year 1976-77 ? " At the hearing, the learned advocate for the assessees submitted that the fact that depreciation on the assets of the assessees was required to be carried forward in a particular manner under a particular section of the Act did not alter its character which was that of a loss. If the section of the Act which permitted carry forward of unabsorbed depreciation ceased to be operative, there was no reason why such depreciation could not be carried forward as a loss under the other section. In support of his contentions, the learned advocate cited the following decisions: (a) CIT v. National Syndicate [1961] 41 ITR 225 (SC). This decision was referred to for the following observations of the Supreme Court (at p. 233): "Loss in business may also take place if the equipment with which business is done is lost, destroyed, or depreciates or suffers in value. The law takes note of the loss, and, provided it has been computed and brought into the books of the business and written off, it can be claimed as a deduction. " (b) CIT v. Jaipuria China Clay Mines (P.) Ltd. [1966] 59 ITR 555 (SC). This decision noted by the Tribunal wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st other heads of income of that year. That this is so becomes clear from this court's observations in Jaipuria China Clay Mines (P.) Ltd.'s case [1966] 59 ITR 555, appearing at page 561 of the report which runs thus : ' The unabsorbed depreciation allowance is carried forward under proviso (b) to section 10(2)(vi) and the method of carrying it forward is to add it to the amount of the allowance for depreciation in the following year and deeming it to be part of that allowance; the effect of deeming it to be part of that allowance is that it falls in the following year within clause (vi) and has to be deducted as allowance. ' " The learned advocate for the Revenue contended to the contrary. He drew our attention to the memorandum explaining the provisions in the Finance Bill, 1975, where the new section 44A which was in the process of being brought into the statute had been discussed. The relevant part of the said memorandum is as follows : "Taxation of shipping profits derived by non-residents. Under the existing law, taxable profits of foreign shipping enterprises are determined by suitably apportioning their global profits between their Indian business and foreign busine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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