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Issues Involved:
1. Whether the assessment made on the trustees on behalf of the unregistered firm of Messrs. U.B. Dutt & Co. is correct in law. 2. Whether the unabsorbed depreciation of the general and cinema business discontinued prior to the year of account under review can be set off against the income of the saw mill business of the year of account which is the subject matter of assessment. Issue-wise Detailed Analysis: Issue 1: Assessment of Trustees on Behalf of the Unregistered Firm The trustees of the Dutt's Trust were assessed on the income from the businesses carried on by them on behalf of Messrs. U.B. Dutt & Co. The trustees contended that the income should be assessed on the creditors as they were the beneficiaries of the trust. However, the Income-tax authorities held that the partners of the unregistered firm were the real beneficiaries. The Commissioner of Income-tax opined that the creditors were not entitled to any specific share of the income of the business, and only the unregistered firm of Messrs. U.B. Dutt & Co. were the real beneficiaries. The court agreed with this view, stating that the profits received by the trustees were to be distributed among the creditors, and the income was received by the trustees on behalf of the general body of creditors. Therefore, the assessment made on the trustees on behalf of the unregistered firm was not correct in law. The tax should be levied on the trustees as trustees for the general body of creditors. Issue 2: Set-off of Unabsorbed Depreciation The trustees claimed that the unabsorbed depreciation of the general and cinema business, which were discontinued prior to the year of account, should be set off against the income of the saw mill business. The Commissioner of Income-tax rejected this claim, stating that Section 10(2)(vi) of the Indian Income-tax Act does not allow for the deduction of depreciation in a business that has ceased to exist. The court upheld this view, stating that if the trustees had continued the cinema business, they would have been entitled to an allowance for depreciation. However, since the business had ceased and the assets were disposed of before the year of account, the trustees could not claim any allowance for depreciation. Therefore, the unabsorbed depreciation of the discontinued businesses could not be set off against the income of the saw mill business. Conclusion: The court answered both questions in the negative. The assessment made on the trustees on behalf of the unregistered firm was not correct in law, and the unabsorbed depreciation of the discontinued businesses could not be set off against the income of the saw mill business. As the assessees succeeded in part and failed in part, no order as to costs was made.
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