TMI Blog1978 (7) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. These assets were subsequently released to the assessee in stages on 31st January, 1948, 2nd September, 1948, and 4th November, 1948. The assets were used by the Government for the same purpose as the assessee was using them all along prior to the requisitioning, i.e., for storage and distribution of petroleum and petroleum products though the distribution was now made by the Government to its various departments and not to private consumers. For such requisitioned assets the Government paid compensation by way of hire charges to the assessee ; the last of such amounts was paid to the assessee for the period January to August, 1949, in the accounting year 1949 relevant to the assessment year 1950-51. Although the assessee could not carry on its business after the requisitioning of these assets by the Government, it did continue for some time to do limited business of buying and selling petroleum and petroleum products. During the accounting years 1942 to 1946, the assessee had made both purchases and sales of petroleum and petroleum products. Up to the assessment year 1942-43, for which the accounting year is the calendar year 1941, the income earned by the assessee was being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned that in that year there was loss in business and, therefore, it appears that the claim for set-off of the unabsorbed depreciation of the past years was not made by the assessee and not even otherwise considered by the ITO. The same position continued in the assessment years 1956-57 and 1957-58, there being once again loss determined in those years. For the assessment year 1958-59, the ITO appears to have allowed the set-off of the loss of the assessment year 1955-56, but once again we find no indication in the order of the ITO as to how the claim for unabsorbed depreciation of the earlier years was dealt with. For the said assessment year, the total income was determined at nil. We then go to the assessment year 1959-60, which is the first of the years under consideration in this reference. There is indication in this order that the ITO considered the unabsorbed depreciation from the assessment year 1955-56 onwards only as available for set-off in the subsequent years. Thus, in computing the income for that year, which was ultimately determined at nil, the ITO allowed the set-off of the loss of the assessment years 1955-56, 1956-57 and 1957-58. The position in the remaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? (4) Whether the unabsorbed depreciation relating to the assets no longer in existence could in any case be so allowed to be set-off ? " The findings of the AAC were supported by the assessee and it was urged ; (i) that some business was carried on by the assessee throughout except for the interregnum caused during the period of inactivity due to compulsion, its commercial assets being requisitioned by the Government ; (ii) that the letting out of such commercial assets, which were exploited by the Government for the same purpose as that of the assessee, amounted to carrying on the same business as had hitherto been carried on; (iii) that even if letting out of the assets amounted to a different business, the unabsorbed depreciation relating thereto was still allowable in the instant years; and (iv) that even assuming there was no business activity at all, the unabsorbed depreciation computed under s. 12 could none the less be allowed against income from business computed under s. 10 in the years inquestion. On a consideration of the entire material and evidence on record, the Tribunal came to the conclusion that the assessee had not discontinued its business in the sense th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion : "Whether, on the facts and in the circumstances of the case, unabsorbed depreciation relating to the assessment years 1943-44 to 1954-55, both inclusive, could be allowed as a set-off in the assessment years 1959-60 to 1962-63, both inclusive ? " Before dealing with the statutory provisions and the authorities which were cited at the bar and submitted for our consideration, it may be mentioned that the copies of the assessment orders of the assessee for the years 1943-44 to 1954-55 are annexed as annexs. "A-1 " to " A-12 ". In the first of those years, it is found in para. 3 of the order that the loss to be carried forward is indicated at Rs. 2,38,675. Similarly, in the next assessment order for the year 1944-45, in para. 4 there is a statement that depreciation amounting to Rs. 75,546 is carried forward. In para. 4 of the assessment order for 1945-46, we find the observation of the officer that depreciation amounting to Rs. 78,035 is carried forward. In all these three years, it may be noted, that the total income arrived at (15) is nil and there is no tax liability on the company. We find, however, change from the next assessment order in which full set-off is allowed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., 1943-44 to 1954-55, the source of income and the carrying forward of the less or depreciation of a particular year would be governed clearly by the provisions of the Indian I.T. Act, 1922. Section 6 of the said Act gives the several heads of income chargeable to income-tax. One of such heads of income is " Profits and gains of business, profession or vocation ", which we find subsequently dealt with under s. 10 of the said Act. Another of such heads of income is " Income from other sources " which is dealt with under the provisions contained in s. 12 of the said Act. In respect of profits and gains of business, profession or vocation, an allowance by way of depreciation is provided for in s.10(2)(vi), and the proviso to s. 10(2)(vi) allows an assessee to carry forward unabsorbed depreciation. It provides that an allowance or part of the allowance by way of depreciation, to which effect has not been given, shall be added to the amount of allowance for depreciation for the following year, and the same is to be deemed to be part of such allowance for that year, and this process is to continue for the succeeding years. In respect of " income from other sources " provided for unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 1954-55 the income earned by the assessee ought to have been considered to be income from business and not as income from other sources. However, the ITO treated the income as income from other sources. The assessment had not been carried further in appeal and inasmuch as the assessee had accepted it, it had become final and the question, therefore, could not be re-agitated and the earlier conclusion upset in the subsequent assessment years which were under consideration before it. It was submitted that this approach of the Tribunal was neither proper nor correct. This was sought to be supported by reference to a decision of the Supreme Court in New Jehangir Vakil Mills Co. Ltd. v. CIT [1963] 49 ITR 137 (SC). The relevant portion of the headnote of that decision, to which our attention was drawn, reads as follows (Headnote) : "For years prior to the calendar year 1944, the assessee was treated as an investor and not a dealer in shares and, in the relevant assessments, profits or loss therefrom were not taken into consideration in computing its taxable income. For the assessment year 1945-46, the assessee was treated as a dealer in shares in the relevant accounting year 1944, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, could be gone into to determine the true position of the assessee as a dealer or investor in 1944 although the conclusion that he was an investor in 1943 must remain undisturbed in the assessment proceedings for the subsequent years. Our attention was then drawn by counsel for the assessee to CIT v. Manmohan Das [1966] 59 ITR 699 (SC). The facts in the said case before the Supreme Court were as follows. By an agreement dated 2nd January, 1931, the assessee was appointed treasurer of the Allahabad Bank for its several branches, sub-agencies and pay offices. As treasurer various duties had to be performed by the assessee. Under the said agreement, the assessee was entitled to monthly allowances subject to a maximum of Rs. 2,250 per month. In addition he was entitled to Rs. 350 per month for travelling expenses. In the previous year relating to the assessment year 1950-51, the assessee had suffered a net loss of Rs. 38,027 in the performance of his duties. The ITO who computed the loss in the year decided that this loss could not be carried forward to the next year to be set off against the income of the subsequent year. This was on the ground that the remuneration received by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing year and set off against the profits and gains of the same business, profession or vocation under section 24(2) has to be determined by the Income-tax Officer who deals with the assessment of the subsequent year. It is for the Income-tax Officer dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year. A decision recorded by the Income-tax Officer who computes the loss in the previous year under section 24(3) that the loss cannot be set off against the income of the subsequent year is not binding on the assessee. " If this decision be properly analysed, it would seem that the application of the principle of finality, which has been submitted for our acceptance by counsel for the revenue and which found favour with the Tribunal has been rejected by the Supreme Court in a substantially similar set up when it opined that the decision of the ITO in the preceding year that the loss cannot be set off against the income of the subsequent year is not binding on the assessee despite the fact that he has rested content with that decision and not carried further the matter by way of appeal. To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be gone into or even re-agitated by the assesses for the years in question when set-off was claimed. In these years, i.e., the later years when set-off is claimed, according to counsel for the assesses, it would not be open for the department to submit that the matter had become final for these earlier years by reason of the assessment orders for these years, against which appeals had not been preferred. It appears to us that this submission will have to be accepted in view of the decision of the Supreme Court in Manmohan Das' case [1966] 59 ITR 699 from which we have extracted a passage earlier. In order to satisfy ourselves we referred to standard text books on the subject and found that various authors on the subject had understood the decision of the Supreme Court in the same sense in which we have understood it. The position as to quantification of the amount of loss appears to be different. Mr. Joshi, on behalf of the revenue, drew our attention to another decision of the Supreme Court in CIT v. Kushal Chand Daga [1961] 42 ITR 177, which was a matter concerning finality of the amount of loss determined in the proceeding years. The Supreme Court in that decision, which need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision in the earlier year is not binding on the assessee. If that decision does not bind the assessee despite the fact that he has not carried the matter further, it will not bind him in the very next year or the year thereafter or in any following year. The fact that the question is sought by the assessee to be redetermined and re-agitated after a lapse of a number of years would seem to have no bearing on the application of the principle commended by the Supreme Court. It may be mentioned that Mr. Munim had also sought to justify his criticism of the approach of the Tribunal with reference to the decisions of the Delhi and the Bombay High Courts. We have not referred to these decisions in the view that we have taken that the point is covered by the decision of the Supreme Court in Manmohan Das' case [1966] 59 ITR 699. We also found these to have little bearing on the question under consideration. We have now to apply the principle enunciated in the said case to the facts elicited by the Tribunal in the statement of case, which we have briefly set out earlier in this judgment. It would appear that for all the years which are mentioned in the question referred to us, i.e., 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year, i.e., 1954-55, the assessee had secured a definite pecuniary advantage by reason of its income being assessed as " income from other sources " under s. 12; whilst retaining that pecuniary advantage it cannot be permitted to re-agitate the question in a later year and submit that the correct head of income was not under s. 12 but under s. 10. For this year, then, because of this special circumstance, the assessee would not be entitled to carry forward the unabsorbed depreciation, if any, for that year and set off the same against the income for any succeeding year. In this view of the matter, the question referred to us is answered as follows : On the facts and in the circumstances of the case, the unabsorbed depreciation relating to the assessment years 1943-44 to 1953-54, both inclusive, could be allowed as set-off in the assessment years 1959-60 to 1962-63. However, the unabsorbed depreciation relating to the assessment year 1954-55 cannot be allowed as set-off in the assessment years 1959-60 to 1962-63. The assessee has succeeded substantially and the result must be that it will be entitled to the costs of the reference from the revenue. There will be an order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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