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Issues Involved:
1. Whether the unabsorbed depreciation of earlier years could be set off against the income of the assessment years 1959-60 to 1962-63. 2. Whether the AAC was competent to direct that the income of earlier years should be treated as business income. 3. Whether unabsorbed depreciation computed under "Income from other sources" could be set off against income computed under "Business" in subsequent years. 4. Whether unabsorbed depreciation relating to assets no longer in existence could be allowed as set-off. Detailed Analysis: Issue 1: Set-off of Unabsorbed Depreciation The Tribunal concluded that the assessee had not discontinued its business during the years 1943-44 to 1954-55, though some income was assessed as "income from other sources." The Tribunal found that the business was in a state of suspense but continued to derive income by exploiting its commercial assets through others. This finding was not challenged by the department and became final. The High Court agreed with the Tribunal's view, relying on the Supreme Court's decision in Manmohan Das' case, which held that a decision of the ITO regarding the non-carry forward of losses in a previous year is not binding on the assessee in subsequent years. Therefore, the unabsorbed depreciation from the years 1943-44 to 1953-54 could be set off against the income of the assessment years 1959-60 to 1962-63. Issue 2: Competence of AAC The AAC held that the business carried on by the assessee from 1955-56 was the same as in previous years and directed the ITO to treat the income from earlier years as business income. The Tribunal, however, found that since the assessments for the years 1943-44 to 1954-55 had become final, the unabsorbed depreciation relevant to these years could not be allowed as set-off in future years. The High Court disagreed, stating that the decision of the ITO in earlier years does not bind the assessee in subsequent years, allowing the assessee to claim set-off in later years despite not appealing the earlier decisions. Issue 3: Set-off of Unabsorbed Depreciation from Different Heads The Tribunal rejected the argument that unabsorbed depreciation computed under "Income from other sources" could be set off against income computed under "Business." The High Court upheld this view, stating that the statutory provisions under the Indian I.T. Act, 1922, did not allow for such a cross-head set-off. Issue 4: Depreciation on Non-Existent Assets The Tribunal decided in favor of the assessee, allowing the set-off of unabsorbed depreciation relating to assets no longer in existence as long as the business continued. This part of the decision was accepted by the department and was not contested further. Conclusion: The High Court concluded that the unabsorbed depreciation relating to the assessment years 1943-44 to 1953-54 could be allowed as set-off in the assessment years 1959-60 to 1962-63. However, the unabsorbed depreciation for the assessment year 1954-55 could not be allowed as set-off due to the specific benefit the assessee obtained by being assessed under "Income from other sources" for that year. The assessee was awarded costs of the reference from the revenue.
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