9911796707
TMI Blog1992 (7) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,54,797 [Depreciation (Note 7, Gross Rs. 41720438) Less: Transferred from Revaluation Reserve Rs. 15,44,122-1986 Rs. Nil] 4,01,76,316 --------------------------------- 1,33,50,88,118 --------------------------------- Profit before Taxation 14,52,30,357 Provision for Taxation 16,00,000 --------------------------------- Profit after Taxation 14,36,30,357 Deduct : Depreciation Relating to earlier years 13,66,39,051 Miscellaneous Expenditure written off ----- --------------------------------- Net Profit 69,91,306 Add : Surplus/(Deficit) brought forward from previous year 32,00,000 ---------------------------------- 1,01,91,306 Deduct : Transfer to Investment Allowance Reserve ------ ---------------------------------- Surplus Carried to Schedule 1,01,91,306 " 3. Schedule 12 contains Notes on accounts and against Serial Number 7, the following observations are found :--- "Depreciation for the year has been provided in the accounts in accordance with the provisions of section 205(2)(b) of the Companies Act, 1956 taking into consideration extra shift allowances, where applicable. Consequent on the above, a sum of Rs. 1,366.39 Lacs being ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------- Rs. 15,96,323 --------------------------- Balance Rs. 14,36,34,034 --------------------------- 30% of the above Rs. 4,30,90,210 " --------------------------- The assessee appealed. 6. The learned CIT(Appeals) has dealt with the contentions of the appellant in paras 28 to 32 of his order dated 14-2-1991. The reasonings of the learned CIT(A) are set out in paras 33 to 38 of his order. It was his view that section 350 of the Companies Act has not undergone any change except for the amendment in relation to rates of depreciation and nowhere it has been stated that arrears of depreciation should be provided for purpose of ascertaining the book profits, as contemplated in section 205(1)(b) of the Companies Act. It was not mandatory on the part of any company to provide for the arrears of depreciation if it was not originally provided in the earlier years, and in this connection he referred to the note relating to the changes made by the Companies (Amendment) Act, which reads as follows :--- " Companies are now required to provide for depreciation as per the rates prescribed in Schedule XIV for the purpose of this Act. The rates of depreciation under Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate item in the profit and loss account, as per the requirements of Parts II III of Schedule VI to the Companies Act, it does not loose its intrinsic character as an element of cost. It is obligatory on the part of the assessee to provide for adequate depreciation before the net profit is ascertained. Prior to the Companies (Amendment) Act, 1988, the depreciation has to be provided as per the rates prescribed in the IT Act, from time to time. The rates prescribed in the Income-tax Act are the minimum rates prescribed and it is open to the company to depreciate its assets even at a higher rate if the company estimated the useful life of an asset for a shorter period than that envisaged in the Income-tax Act. Again, prior to Companies (Amendment) Act, 1988 it was not free from doubt whether the rate of depreciation should cover additional shift allowance. Some thought that it was obligatory on the part of the company to provide for not only normal depreciation but also depreciation on extra shift and triple shift, if the machineries worked for such shifts. If provision for depreciation on extra shift and triple shift was not made in the accounts it would result in understatem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before ascertainment of net profits. As the depreciation is a charge against the profits, any under-provision has go through the profit and loss account only. It can never be viewed as an appropriation of profit. By definition ' depreciation ' is a provision for diminution of value of an asset and a provision is always charged against the profits. 8. In this context he referred to the following publications :--- (a) ' Guidance Note on Accounting for Depreciation in Companies ' issued by Research Committee of the Institute of Chartered Accountants of India - Sept. 1989 ; (b) Depreciation Accounting (AS-6), issued by the said Forum - November 1982 : (c) ' Provision for Depreciation in Respect of Extra or Multiple Shift Allowance ' (Compendium of Guidance Notes) Published in the Chartered Accountant Journal, May 1984 ; and (d) Circulars of the Company Law Board issued from time to time ; and submitted that from a review of the above publications, it would be abundantly clear that depreciation can never be considered as an appropriation of profit. 9. Shri Sarangan further submitted that section 115J does not define ' book profits '. The said section only provides for ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Act with wide powers of supervision and control over the Registrar of the Companies, is something akin to CBDT in tax matters. That authority has approved the profit and loss account and therefore it is not for the Income-tax Officer to say that the accounts of the assessee are not in accordance with the Provisions of the Companies Act. Once the accounts are audited and placed before the General Meeting and filed with the Registrar of Companies, the statements found therein should be taken to be true reflecting the " true and fair view " unless the contrary is proved. While computing the total income of an assessee, the Income-tax Officer has got all the powers to make additions and disallowances. But so far as section 115J is concerned, he has to take the book profits as starting point and his power is only confined to make such adjustments as are enumerated in section 115J. He has no right to substitute the figure of book profits, as he liked. In other words, the authorities did not have the jurisdiction to go behind the book profit and substitute a figure of their choice in its place. 11. Shri Abraham, the learned Senior Departmental Representative submitted that the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is a legitimate charge but not the arrears of depreciation. As for the assessee's argument that arrears of depreciation is allowed as a deduction from the book profits, within the meaning of sub-clause (iii) of Explanation 1 to section 115J of the Act, he submitted that only when the company has suffered losses and declaration of dividend is in contemplation, the loss or depreciation that had been provided in the books of accounts whichever is less is eligible for deduction from the book profits in terms of Explanation to section 115J. The sine qua non for such adjustment to be made is that the loss or the depreciation should have been provided in the books ; otherwise not. The absence of reference to section 205(1)(a) in sub-clause (iii) of the Explanation is significant and if the legislative intention was to allow adjustment for arrears of depreciation for purpose of computing the book profits for section 115J, it would have provided so by referring to section 205(1)(a) of the Companies Act under the Explanation. Further it was argued by Shri Abraham that if the depreciation computed as per sections 205(2) and 350 of the Companies Act included the arrears in respect of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chartered Accountants of India and contended that in terms of paras 15, 16, 17, 18, 20, 21 and 22 the company is required to charge the depreciation on the revised rates only from the year of change of rates and a company following Circular No. 1/86 can continue to charge depreciation on straight line basis at the old rates in respect of the assets existing on the date on which the revision regarding the depreciation came into force and SLM rates prescribed in Schedule XIV can be straightaway applied to the original cost of all assets including assets from the year of change of rates. The assessee has deliberately charged arrears of depreciation in the previous year ended 31-10-1987 relevant to the assessment year 1987-88 by one stroke of pen just to reduce its tax liability under the provisions of section 115J of the Act ; and therefore, the ratio laid down in McDowell Co. Ltd. v. CTO [1985] 154 ITR 148 (SC) is clearly attracted. 15. To the assessee's argument that the Department of Company Affairs had in its letter dated 21-10-1991 clarified that the charging of arrears of depreciation in the profit and loss account of the company for the year ended 31-10-1987 appears to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken steps to penalise the company for acts of omissions and commissions. The accounts have to be prepared not only in the manner indicated in Schedule VI of the Companies Act but also in accordance with provisions of the Companies Act. For the convenience of the Companies, on account of frequent and far reaching amendments in the rates of depreciation in the Income-tax Act, or amendments to the Companies Act, certain course of action such as charging depreciation on the straight line method on the basis of the rates originally adopted for reducing the cost of the assets to 95% of its value was permitted or was not frowned upon. It was only a permissive action in the nature of removal of hardships granted by the Department of Company Affairs and the same would be binding on Company Law enforcing authorities. However, that doesn't mean that such a course of action has the sanction of the provisions of section 205 read with section 350 of the Companies Act. No doubt, section 205(1)(b) of the Companies Act has been engrafted in section 115J of the Income-tax Act but to read that section in isolation de hors the other provisions of section 205 of the Companies Act would be to take a ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in (a) to (f) and (i) to (iii) of Explanation to section 115J. The appellant's further contention is that its accounts are subjected to audit under the provisions of Companies Act, 1956, they have in fact been audited by a duly qualified Chartered Accountant under the provisions of the Companies Act, and the same were approved at the Annual General Body Meeting of the company and the documents were filed with the Registrar of Companies, who has not found any fault with the accounts of the company. Further the Department of Company Affairs has approved the net profit as shown in the accounts when it sought clarification and therefore the Income-tax Officer cannot question the correctness of the net profit as shown in the company's accounts. 18. On the other hand, the learned Sr. Departmental Representative contends that one need not be guided by the net profit as shown in the profit and loss account, if the same is not in accordance with the provisions of Parts II and III of Sixth Schedule to the Companies Act. In other words, it is the contention of the revenue that the Income-tax Officer can substitute his own figure of net profit, thus going behind the net profit as shown in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards depreciation relating to earlier years is considered to be in accordance with the provisions of Parts II Part III of the Sixth Schedule to the Companies Act, 1956. A copy of the Company's Profit Loss Account for the relevant year is enclosed. Kindly refer page 17. Part III of the Sixth Schedule only interprets certain words and phrases used in Part I Part II and, therefore, is not relevant here. Part II of the Sixth Schedule lays down as to how the Profit Loss Account shall be made out and which items of income and expenditure shall be disclosed. The relevant portion of Part II reads as follows : ' 3. The profit and loss account shall set out the various items relating to the income and expenditure of the company arranged under the most convenient heads ; and in particular, shall disclose the following information in respect of the period covered by the account :--- (i) .............................................. (ii) .............................................. (iii) ............................................. (iv) The amount provided for depreciation, renewals or diminution in value of fixed assets. If such provision is not made by means of a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with the provisions of the Companies Act, 1956." From the above it will be evident that the net profit shown in the profit and loss account of the appellant for the year ending on 31-10-1987 is in accordance with the provisions of Parts II III of Sixth Schedule to the Companies Act, as has been held by the Department of Company Affairs. The argument of the learned departmental representative that as the Department of Company Affairs has in relation to the profit has used the expression " appears to be in accordance with the provisions of Companies Act, 1956 " would go to show that the Department has not applied its mind to the issue before it, is to be stated only to be rejected. It is normal practice for the governmental authorities to use the words of caution or protective languages even while giving clarification on an issue. Therefore, much mileage cannot be made out of the expression " appears to be " found in the communication of Department of Company Affairs dated 21-10-1991. The assessee is a public limited company. whose shares are quoted in the Stock Exchange. Its accounts are subjected to annual audit by duly qualified Chartered Accountants. The Accounts hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will have been provided for by way of depreciation if depreciation were to be calculated in accordance with the provisions of section 350." In this context reference to section 350 may be relevant : " 350. Ascertainment of depreciation -- The amount of depreciation to be deducted in pursuance of clause (k) of sub-section (4) of section 349 shall be the amount calculated with reference to the written down value of the assets as shown by the books of the company at the end of the financial year expiring at the commencement of this Act or immediately thereafter and at the end of each subsequent financial year, at the rate specified for the assets by the Indian Income-tax Act (1961), and the rules made thereunder for the time being in force, as normal depreciation including therein extra and multiple shift allowances but not including therein any special, initial or other depreciation or any development rebate, whether allowed by the Act or those rules or otherwise." The Department of Company Affairs issued the following memorandum on the subject which is found in pages 783 to 789 of the Guide to Companies Act by A. Ramaiya, Tenth Edition 1984. The following questions and answer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for depreciation for double shift and triple shift workings should be provided for in the accounts and such view was also held by the Institute of Chartered Accountants of India in its Bulletins, the issue was not free from doubt. In this connection, the Editor's note in page 788 is relevant : " The view taken by the Company Law Board that while determining depreciation according to the straight line method requires the company to take into account the provision for multiple shift allowance. does not appear to be correct. A company has at the inception to determine whether it will adopt in maintaining its accounts the straight line method or the written down value method for providing depreciation. Adoption of the straight line method predicates determination of the specified period, at the inception since the period is fixed in respect of an asset it cannot go on changing year after year, according as the company works additional shifts. When the straight line method is adopted the amount to be deduced annually will be uniformly deductible throughout the lift of the asset till 95 per cent of the cost to the company is provided. The view of the Department will be inconsistent w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revised rates of depreciation under the amended Income-tax Rules in respect of various assets. (d) Reclassification of certain items of plant under the main head ' Plant Machinery '. A sum of Rs. 1267.60 lakhs representing depreciation provided in the accounts for earlier years in excess of the amount required to be provided as re-computed on the above basis has been adjusted in arriving at the depreciation relating to earlier years debited to the Profit Loss Account. Had the company followed the practice adopted in previous years the charge of depreciation would have been higher by Rs. 31.27 lacs. The extra shift depreciation not provided as per (a) above for the period up to 31-10-1986 amounts to Rs. 1,948 lakhs including Rs. 127 lacs for the year. " However, in the previous year ending 31-10-1987, relevant to the assessment year 1988-89, the assessee had provided for arrears of depreciation in respect of additional shifts, in view of Schedule XIV to the Companies Act coming into force with effect from 2-4-1987. Schedule XIV has prescribed the rate of normal depreciation and also the rate for double shift and triple shift workings. At page 1706 in Datta on The Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not mandatory on the part of the company to provide the arrears of depreciation if it was not originally provided in the earlier years. The so-called amendment is only in respect of depreciation to be provided for the current year with effect from 2-4-1987 ". We are in respectful disagreement with the views expressed by the learned first appellate authority. Companies which are desirous of paying dividend have to follow the mandatory provisions of section 205 of the Companies Act. Under section 205(1), a company cannot declare or pay dividend out of its profits of any financial year falling after the commencement of the Companies (Amendment) Act, 1960, without providing for depreciation. Proviso (a) to section 205(1) provides that, in case a company has not provided for depreciation for any previous financial year or years after the commencement of the Companies (Amendment) Act, 1960, the arrears of such depreciation have also to be provided before declaring or paying dividend out of profits. Thus, before declaring or paying dividend for any financial year out of its profits, a company has to provide for depreciation for the financial year concerned as well as any arrears of depr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for any known liability." is in excess of the amount which in the opinion of the Directors is reasonably necessary for the purpose, the excess shall be treated for the purpose of this Schedule as a reserve and not as a " provision ". From the definitions appearing in the interpretation clause as respects " provision " and the requirement in sub-clause (iv) of clause 3 of Part II to Schedule VI to the Companies Act, it can be safely inferred that the profit and loss account must disclose the provision for depreciation on its fixed assets. If provision for depreciation was not made, in addition to the fact that no such provision has been made the arrears of depreciation in terms of section 205(2) should also be quantified and highlighted by way of a separate note. In other words, the intention of the Legislature as found in sub-clause (iv) cited supra is to look upon " arrears of depreciation " as part of current depreciation. We draw additional support for this proposition from clause (a) to proviso to section 205(1) of the Companies Act, which is as follows : "If the company has not provided for depreciation for any previous financial year or years which falls or fall after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The revenue places strong emphasis on sub-clause (a) of clause 2 cited above and in that process overlooks the provisions of sub-clause (b) thereof Sub-clause (b) is wider in its import than sub-clause (a) as it is inclusive in its contents. The prior period expenses or income would fall under sub-clause (b) as material features affecting the accounts. In our considered opinion both the sub-clauses (a) and (b) should be read together. In other words, the arrears of depreciation, even if it is considered as a prior period expenditure, will have its natural accomodation in the profit and loss account of the period covered by the accounts. To ignore that is to ignore the obvious. 26. Even if it is held that arrears of depreciation is not a legitimate charge against the profits of the year but should be viewed only as an appropriation of profit, still the same cannot be added back to arrive at the book profit for purposes of section 115J. The Explanation to section 115J deals with certain specific adjustments. Some of the items mentioned therein can be viewed as forming part of the income or the expenditure of the year under review, as for example, the adjustment mentioned in cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not reproduced here as they involve minor issues.] 39. Further grounds of appeal are as follows : " 7. (a) That the learned Commissioner of Income-tax (Appeals) erred in law and on the facts and in the circumstances of the case in confirming the exclusion of dividend income amounting to Rs. 1,51,89,760 in computing the profits of eligible business under sub-section (3) of section 32AB and holding that such adjustment was in accordance with sub-section (3) of section 32AB of the Income-tax Act, 1961. (b) That the learned Commissioner of Income-tax (Appeals) erred in law and on the facts and in the circumstances of the case in not holding that the entire business of the assessee-company including earning of dividend income is " eligible Business or Profession " within the meaning of sub-section (2) of section 32AB of the Income-tax Act, 1961. He further erred in equating the concept of " profits gains of business or profession " under section 28 of the Income-tax Act, 1961, with the profits of ' eligible business or profession ' under section 28 of the Income-tax Act, 1961, with the profits of eligible business or profession as referred to in sub-section (3) of section 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40. As for the exclusion of the dividend on units of Unit Trust of India from the profits of eligible business, the learned CIT(Appeals) sustained the order of the Deputy Commissioner of Income-tax (Assessment) on the ground that such income will not fall within any of the items of clause (a) of section 32AB(3). The assessee is aggrieved. 41. Shri Sarangan submitted that the assessee was having only one account for both manufacture of tyres for sale and purchase and sale of Units. The income from Unit Trust was recognised as an income in the profit and loss account and thus the business profit was ascertained. It is one thing to assess it under other sources ; but it is another thing to say that it does not form part of the eligible business profits. As far as the assessee is concerned, the units are held as stock-in-trade as it is frequently buying and selling the same, and there is one common account of funds and management and, therefore, the activities of (a) manufacture and sale of tyres and (b) dealing in the units of Unit Trust of India cannot be segregated one from the other and must be considered as part of the same business. 42. Shri Abraham, the learned senior de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twenty per cent of the profits of eligible business or a profession as computed in the accounts of the assessee audited in accordance with sub-section (5), whichever is less : (2) For the purposes of this section,---- (i) ' eligible business or profession ' shall mean business or profession, other than-- (a) the business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule carried on by an industrial undertaking, which is not a small scale industrial undertaking as defined in section 80HHA ; (b) the business of leasing or hiring of machinery or plant to an industrial undertaking, other than a small scale industrial undertaking as defined in section 80HHA, engaged in the business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule ; (3) The profits of eligible business or profession of an assessee for the purpose of sub-section (1) shall--- (a) in a case where separate accounts in respect of such eligible business or profession are maintained, be an amount arrived at after deducting an amount equal to the depreciation computed in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or the amount invested in the purchase of new machinery or new plant is concerned. In other words, the source of the amount for deposit or for the purchase of the new machinery should come from income chargeable to tax under the head profits and gains of business. But the definition of " eligible business or profession " is in a sense wide. Except those business specified in clause (a) (b) of sub-section 2 of section 32AB, all other business or profession have to be construed as " eligible business ". In other words, an eligible business need not necessarily be an industrial undertaking engaged in the manufacture or production of an article. One of the components to be considered for deduction under sub-section (1)(ii) of section 32AB is the profit of eligible business to the extent of 20% of the same. That profit has to be computed in the manner laid down in sub-section (3) of section 32AB cited supra. We, therefore, conclude that whatever income is earned by the assessee either from its activity of manufacture or production for sale or from other activities such as dealing in shares and earning profits thereon and receiving income on such shares in the interim period as long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ather more specifically, in computing 20% of the eligible profit, the income from units of Unit Trust of India (dividends and profit or loss on the sale of units) should also be considered along with other income as found in the profit and loss account prepared in accordance with Part II and Part III of the Sixth Schedule to the Companies Act, subject to such adjustments as have been prescribed therein. With these directions, we part with the issue. 45. [This para is not reproduced here as it involve minor issue.] 46. The further ground of appeal is in two parts which are as follows :-- (a) That the learned Commissioner of Income-tax (Appeals) erred in law and on the facts and in the circumstances of the case in holding that buying and selling of units is a speculation business and the loss incurred on account of buying and selling of units amounting to Rs. 22,69,700 will amount to speculation loss. (b) That the learned Commissioner of Income-tax (Appeals) erred in law and on the facts and in the circumstances of the case in applying the provisions of section 73 of the Income-tax Act, 1961 to the units of Unit Trust of India which cannot be equated with the shares of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der a unit scheme ; (q) ' unit holder ' means a person for the time being recognised by the Trust as the holder of a unit certificate under a unit scheme ; (r) ' unit scheme ' means a scheme made under section 21." 48. According to section 4, the initial capital of the trust will be five crores of rupees to be contributed by the Reserve Bank of India, Life Insurance Corporation of India, State Bank of India and its subsidiaries and such other institutions, viz., scheduled banks and other financial institutions as may be notified by the Central Government. From these definitions it is clear that a unit holder is not a shareholder of the Unit Trust of India. Only the institutions specified in section 4 can be said to be the contributing institutions. A unit holder is just an investor. He has no right in the management of the Trust. The dividends that are declared by the Unit Trust of India are not at the instance or approval of the unit holder. The unit holder has no say in the affairs of the Trust. Therefore, the unit holder cannot be treated as a shareholder and the units cannot be treated as shares. Hence, the Explanation to section 73 of the Income-tax Act, which concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are available to the unit holder, such rights having been perhaps reserved for the initial contributors, such as Reserve Bank of India, Life Insurance Corporation of India, etc. The Explanation to section 73 of the Income-tax Act, 1961 arises only when there is transaction in the purchase and sale of shares. Units not being shares, and further as each purchase and each sale was accompanied by physical delivery of units, it cannot be said that the assessee was indulging in speculative transactions when it dealt with the purchase and sale of shares. The order of the CIT (Appeals) is set aside on this issue. 50. This leaves us to consider the following ground of appeal : " 2. (a) That the learned Commissioner of Income-tax (Appeals) erred in law and on the facts and in the circumstances of the case in holding that the assessing officer was justified in setting off of brought forward depreciation against dividend Income. (b) That the learned Commissioner of Income-tax (Appeals) erred in law and on the facts and in the circumstances of the case in confirming the action of the assessing officer is not assessing the income from ' other sources ' separately as returned by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assage from Shri Sampath Iyengar's Law of Income-tax, Eighth Edition, page 2935 : " 9. Set off, not a matter of opinion,--- The language of the present section 70 and, earlier of sub-section (1) of section 70 and also of clause (i) and (ii) of sub-section (2) thereof is that " the assessee shall be entitled to have the amount of such loss set off against the income ....... They do not confer an option to the assessee not to have the short-term capital loss or the long-term capital loss adjusted in the manner provided in section 70. Such an option is negatived by the fact that section 74 relating to carry forward of losses requires that the net result under the head " capital gains " shall be ascertained, i.e. in one single sum, which can only be achieved by adjusting all profits as against all losses. Moreover, such an option would contradict the entire scheme of the capital gains taxation which is separately provided for in sections 71 and 74. The expression, hence " shall be entitled " occurring (formerly at three places) in section 70 would have to be uniformly understood as no more than disentitling the Assessing Officer to deny the set off. Subject to the aforesaid except ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome other than ' capital gains '." We underline the expression " if the assessee so desires " and hold that no such option is found in relation to the set off and carry forward of unabsorbed depreciation. Moreover, the provisions relating to depreciation constitute a separate code by itself. In Rajapalayam Mills Ltd. v. CIT [1978] 115 ITR 777 the Supreme Court has observed that it is settled law that though the profits of each distinct business carried on by an assessee have to be computed separately in accordance with the provisions of section 28 etc., the tax is chargeable under those provisions not separately on the profits of each business, but on the aggregate of the profits of all the business carried on by the assessee. It follows, therefore, that where the assessee carries on several business, he is entitled to set off of loss in one business against profits in another. If in any year there is any loss in a business carried on by the assessee by reason of the profits of such business not being sufficient to absorb the depreciation allowance, such loss can be set off against the profits of another business carried on by the assessee in that year. If however, there are no ..... 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