9911796707
|
Home
Issues:
- Interpretation of whether unabsorbed depreciation from earlier years can be set off against profits under section 41(2) for a subsequent assessment year. Analysis: The judgment revolves around the question of whether unabsorbed depreciation from earlier years can be set off against profits under section 41(2) for a subsequent assessment year. The case involved an assessee-company in liquidation during the financial year 1963-64, with returns filed for subsequent years, including 1970-71. The company sold plant and machinery during the accounting year 1970-71, resulting in a profit. The Income-tax Officer estimated the written down value of the plant and machinery and adjusted it against the sale price to determine assessable profit under section 41(2). The Appellate Assistant Commissioner allowed the set-off of unabsorbed depreciation from earlier years against the profits for the assessment year 1970-71 under section 32(2). The Tribunal's decision was based on the interpretation of relevant provisions of the Income-tax Act. It relied on the Allahabad High Court decision in Commissioner of Income-tax v. Rampur Timber & Turnery Co. Ltd., holding that unabsorbed depreciation from past years could be set off against profits for the relevant previous year. Section 32 allows for the carry-forward of unabsorbed depreciation to subsequent years for set-off against profits. Additionally, section 41(5) allows for the set-off of losses from a business no longer in existence against income chargeable under section 41(2). The judgment discussed the application of section 41(2) regarding the sale of assets owned by the assessee for business purposes. The Explanation to the section clarified that even if the business ceased to exist, the profits from such sales are chargeable to tax in the relevant previous year. The court emphasized the importance of allowing the set-off of carried forward unabsorbed depreciation against profits computed under section 41(2) to give effect to the legislative intent and prevent tax anomalies. The court distinguished the case from Commissioner of Income-tax v. Ajax Products Ltd., highlighting the inapplicability of the decision to the current scenario. It concluded that the unabsorbed depreciation from past years should be treated as the depreciation allowance for the relevant accounting year when the business ceased to exist, allowing for set-off against profits for the assessment year 1970-71. The judgment favored the assessee, affirming the Tribunal's decision and directing the answer to the question in the affirmative, in favor of the assessee and against the department.
|
