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Interpretation of proviso (b) to clause (vi) of sub-section (2) of section 10 of the Indian Income-tax Act regarding the adjustment of unabsorbed depreciation against profits in subsequent years. Analysis: The case involved a private limited company that had shifted its business from manufacturing rubber shoes to importing trimobiles, clocks, and cement. The company claimed unabsorbed depreciation from the years when it was manufacturing shoes against profits in the assessment years 1956-57 and 1957-58. The key question was whether the company could set off the unabsorbed depreciation from the previous years against the profits of the new business activities. The proviso (b) to clause (vi) of sub-section (2) of section 10 of the Income-tax Act was central to this issue. The court examined the legislative intent behind the provision and the scope of section 10, which deals with the computation of profits and gains of a business. The court emphasized that the provision for depreciation allowance is tied to the continuity of the business. It was held that for an assessee to claim adjustment of unabsorbed depreciation in a subsequent year, the business must be continuing. If the business ceases to exist, unabsorbed depreciation cannot be adjusted in future assessments. The court highlighted that the provision aims to safeguard the interest of the assessee by allowing adjustment in subsequent years without time limitations. The court rejected the contention that the proviso (b) was a substantive provision of law independent of clause (vi) of sub-section (2) of section 10. The court distinguished previous decisions cited by the assessee, emphasizing that those cases did not address the specific issue of adjusting unabsorbed depreciation against profits in subsequent years. The court clarified that the proviso was designed to ensure the proper computation of profits and gains of a business and did not allow for adjustment if the business was no longer operational. Ultimately, the court answered the question in the negative, ruling that the assessee could not claim the deduction of unabsorbed depreciation against profits in the assessment years 1956-57 and 1957-58. The court also ordered the assessee to pay the costs of the department, concluding the judgment.
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