TMI Blog1976 (12) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... " In the instant case, we are concerned with the assessment year 1967- 68. The assessee is a private limited company. It was running an oil mill at Warangal and earlier at Jammikunta. The assessee-company sold the building, machinery, etc., on October 22, 1965, to M/s. Adilabad Cotton Co. Private Ltd. and the title to the immovable property was transferred on February 19, 1966, but the document of transfer was registered in October, 1970. The previous year relevant to the assessment year 1967-68 ended on November 12, 1966. For that accounting year, the assessee originally returned an income of Rs. 6,213 by its return filed on October 31, 1967. Subsequently, a revised return was filed on September 2, 1970, declaring an income of Rs. 9,466. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sold and the contention was that when profit was being computed by virtue of the deeming fiction under section 41(2), unabsorbed depreciation under section 32(2) has to be given effect. The Appellate Assistant Commissioner accepted the assessee's contention in the light of the decision of the Supreme Court in Commissioner of Income-tax v. Jaipuria China Clay Mines (P.) Ltd. [1966] 59 ITR 555 (SC). He directed the Income-tax Officer to give, set off of the unabsorbed depreciation subject to verification of the actual amounts thereof. Against the decision of the Appellate Assistant Commissioner, the department took the matter in appeal before the Appellate Tribunal and at that stage, reliance was placed on section 41(5) of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in this sub-section become due in a previous year in which the business or profession for the purpose of which the building, machinery, plant or furniture was being used is no longer in existence, the provisions of this sub-section shall apply as if the business or profession is in existence in that previous year. It is obvious, therefore, that by virtue of the Explanation to section 41(2) a deeming fiction is created and by virtue of that deeming fiction, the business which is no longer in existence is for the purposes of section 41(2) deemed to be in existence in the previous year in the course of which the machinery, plant or furniture in respect of which depreciation has been allowed in earlier years is sold, discarded, demolished or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n referred to in this section is no longer in existence and there is income chargeable to tax under sub-section (1), sub-section (2), sub-section (2A), sub-section (3) or sub-section (4) in respect of that business or profession, any loss, not being a loss sustained in speculation business or under the head 'capital gains', which arose in that business or profession during the previous year in which it ceased to exist and which could not be set off against any other income of that previous year shall, so far as may be, be set off against the income chargeable to tax under the sub-sections aforesaid." Really speaking, section 41(5), as Mr. Dasaratharama Reddy for the assessee rightly points out, is meant for the benefit of the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustries Ltd. [1963] 49 ITR 145 (Bom) has also held : "Depreciation allowance permitted under section 10(2)(vi) is available in the first place in the computation of the income of the business in which the depreciation is allowed, and is adjusted against the profits and gains of that business. If the depreciation allowance is larger than the profits or gains in that business, so that an excess remains after the profits and gains are absorbed, such excess comes under section 10(1) for absorption of the profits and gains of other businesses, if any, carried on by the assessee. If a balance of the depreciation allowance is left even thereafter, that balance is available for set-off against the assessee's income from any other head during tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot thereafter be adjusted in the assessment of future years in respect of a different business. But the effect of the deeming fiction now embodied in section 32(2) which was formerly embodied in section 10(2)(vi) of the Indian Income-tax Act, 1922, has been, in our opinion, correctly explained by the Bombay High Court itself in Ravi Industries' case [1963] 49 ITR 145 (Bom) particularly after the decision of the Supreme Court in Commissioner of Income-tax v. Jaipuria China Clay Mines (P.) Ltd. [1966] 59 ITR 555 (SC). It is clear that the unabsorbed depreciation of past years has to be added to the depreciation of the current year and the aggregate unabsorbed and current year's depreciation has to be deducted from the total income of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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