1994 (12) TMI 119 - AT - Income Tax

Summary

Issues:
1. Disallowance of set off for carried forward loss.
2. Validity of unabsorbed depreciation and investment allowance claims.
3. Obligation of the ITO to consider and allow valid claims.

Analysis:
The appeal concerns the disallowance of set off for carried forward loss by the Income Tax Officer (ITO) in the assessment of the appellant, engaged in the business of manufacturing ice. The ITO rejected the claim for set off based on the completion of the assessment for the previous year at Rs. Nil. However, the appellant argued that the unabsorbed depreciation and investment allowance claims were legally valid and should not have been rejected. The Commissioner of Income Tax (Appeals) upheld the ITO's decision, leading to the appeal before the Tribunal.

Upon review, the Tribunal found the actions of the tax authorities unjustified both factually and legally. The Tribunal examined the assessment details for the preceding years and noted that the carried forward loss from the previous year was adjusted against the current year's income, resulting in a net income of Rs. 37,224. The Tribunal emphasized that the ITO's nullification of the legal claims was not permissible, as it is an established legal principle that valid claims of an assessee must be considered and allowed on their merits.

Furthermore, the Tribunal considered a scenario where the appellant had not filed a return for the relevant year but had incurred losses in the preceding years. Even in such a situation, the Tribunal opined that necessary adjustments should be available to the appellant in the subsequent year concerning unabsorbed depreciation and investment allowance, provided all legal conditions were met.

In conclusion, the Tribunal accepted the appellant's claim regarding the set off of unabsorbed depreciation and investment allowance from previous years against the current year's business income. The Tribunal directed the Income Tax Officer to verify the figures and ensure compliance with all legal requirements for the set off to be allowed.